The Difference Between Agreed Value and Actual Cash Value Policies

Insuring your valuable possessions may prove to be among the most important financial decisions you ever make. Accidents and mishaps can inevitably occur regardless of how careful you may be with your prized belongings or how diligently you maintain and protect them. The aftermath of these situations, which can carry not only financial implications but also emotional ramifications, is no time to realize your coverage is insufficient. With this in mind, understanding agreed value vs. actual cash value insurance is essential.

What Is Agreed Value Coverage?

Agreed value coverage is an option available in certain insurance policies, typically applying to high-value or rare items. For example, one of the most significant differences between classic car insurance and standard auto policies is the availability of agreed value coverage. Collectibles and jewelry may also be covered using agreed value clauses. Essentially, agreed value coverage allows you and your insurance company to decide on a standing value for your belongings. This value will not depreciate over time and can help you fully recoup losses and potentially pay to restore, repair or replace your property.

What Is Actual Cash Value Coverage?

In contrast to agreed value coverage, actual cash value policies may provide different payouts for lost, stolen or damaged items while accounting for depreciation. For instance, although your car may be valued at $100,000 at the time that you purchase your insurance, automobiles typically lose value over time. As such, if your vehicle were to be totaled or stolen in the future, your maximum payout would be calculated using its market value at the time of the incident.

How Can I Choose the Right Coverage?

Essentially, selecting the right choice between agreed value and actual cash value policies comes down to your risk tolerance, the nature of the item and your budget. Agreed value coverage can objectively provide greater financial protection, but such policies typically come with higher premiums. For irreplaceable or highly valuable possessions, that added cost may be well worth it. A qualified insurance professional can help gauge your situation and recommend appropriate coverage.

We’re Here to Help

Contact Southern Insurance AL LLC in Foley, AL, today to learn more about agreed value and actual cash value, and identify the right policy for you and your cherished commodities.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.