What does "replacement value" re. insurance mean exactly?

[jymbee]

In the event of an accident, just how is replacement value calculated? What would the difference be if a claim was filed in the same circumstances with a policy that does not include replacement value?

 

[BoomerD]

However they want to calculate it. USUALLY, (at least for cars/trucks, in my experience) they use a database of similar vehicles recently sold in your area...and that?s something that can be challenged if it?s too low...but not always.

 

[Joezeppy]

It should be defined further in your policy but there are two primary means of replacement in insurance policies (other means exist but are less common or used for special circumstances):

• Replacement Cost - this is most common on a Homeowners policy and means the insurance company will replace your damaged/stolen goods with new goods of similar quality. Example, your TV is stolen, they buy you a new TV of similar size and with similar features.
• Market Value or Actual Cash Value - this is most common on an Auto policy but also found on some Homeowners policies and means that the insurance company pays you for the fair market value of your damaged/stolen goods.

Some Auto insurance companies now offer "new car replacement" which is like Replacement Cost for an Auto policy. Instead of fair market value, they will pay for a new car (or more accurately, a "newer" car within so many model years).

 

[Optimistic Paranoid]

Take a look at this:

http://www.rv-dreams.com/rv-insurance-coverages.html#Total

 

[Gary RV_Wizard]

That article is substantially accurate, though actual time periods and procedures will likely vary somewhat among different insurers.  The key, though, is that "replacement value" means a new one or equivalent new one.  There may be an upper dollar limit on what the new one can cost, e.g. 20% over purchase price or MSRP or the age limit described in the article, so ask careful questions before buying the "replacement cost" feature.  However, if you don't buy it, you get ACV (Actual Cash Value, usually determined by NADA book value).  Theoretically that lets you buy another used one of similar age and model.

 

[cerd]

Cost to replace it with an equivalent model of the condition. My brokers told me up front that my 1990 G30 Class 3 would be worth about $4700 if it were totaled.

 

[jymbee]

That article is substantially accurate, though actual time periods and procedures will likely vary somewhat among different insurers.  The key, though, is that "replacement value" means a new one or equivalent new one.  There may be an upper dollar limit on what the new one can cost, e.g. 20% over purchase price or MSRP or the age limit described in the article, so ask careful questions before buying the "replacement cost" feature.  However, if you don't buy it, you get ACV (Actual Cash Value, usually determined by NADA book value).  Theoretically that lets you buy another used one of similar age and model.

Thanks to all who replied-- good info. I'll have to dig into my policy to see the explicit details-- assuming they're there...

 

[Gary RV_Wizard]

Cost to replace it with an equivalent model of the condition. My brokers told me up front that my 1990 G30 Class 3 would be worth about $4700 if it were totaled.

That's ACV - Actual Cash Value.