What's the Difference Between "Actual Cash Value" and "Replacement Cost"?

• Two important terms, especially with homeowner and automobile insurance, are "actual cash value" --- sometimes shortened to ACV --- and "replacement cost." The term "actual cash value" represents the fair market value of the insured item. To determine this amount, the going prices of similar models or homes on the market are averaged together. This value changes over time, as the item may appreciate or depreciate during its lifetime. "Replacement cost," on the other hand, refers to the fair market value of the same or similar item without depreciation. For example, if you own a 2009 Honda Accord, the actual cash value would be what the car would sell for on a used-car lot, but the replacement cost would reflect the going price of a brand-new 2011 or 2012 Accord.
  
  

Do I Need an Attorney?

• You don't need an attorney to purchase insurance. However, if your insurance company has denied your claim or you're otherwise having difficulty getting an issue accomplished or settled with your insurance company, you may want to speak with an attorney. Although it's the insurance company's job to protect you, it's still a business --- it only makes a profit by collecting premiums and not paying out any money.
  
  

What's the Deductible?

• A deductible is how much you must pay out of pocket before the insurance company pays the rest. For example, your car insurance may require you to pay a $500 deductible for all claims. Whether the total claim is valued at $600 or $6,000, you still must pay $500; the insurance company pays the rest. How much your deductible is depends on your premiums. Generally, the higher the deductible, the lower the premium. In other words, if you carry a high deductible, you pay less for your insurance policy.
  
  

Can the Insurance Company Cancel My Policy?

• Yes, and for any reason or no reason at all. However, the insurance company must give you at least 30 days' notice before the cancellation.