How’s a car policy different from your home policy?

How’s car insurance different from most home policies?  In an earlier post, I covered the two broad categories of home insurance policies, actual cash value and replacement cost policies.  The difference between the two policies revolves around how claims are paid.

  • Actual cash value (ACV) policies pay claims on a depreciated basis.  The total amount of the claim is reduced by the amount of depreciation incurred.  This is most noticed when a car is totaled.
  • Replacement cost (RC) policies pay claims on the basis what it would cost to replace a roof or a floor or a home.

Car insurance is an actual cash value policy.  Some policies provide an option on new cars (cars one year old or less) that provides a temporary replacement cost basis on a car policy.  There’s also gap insurance that helps protect an owner from having to continue to make payments on a vehicle that’s been totaled and they owed more than the value of the vehicle.  But even if gap coverage is added, it doesn’t replace the car so the policy is still an actual cash value policy.

I’ll cover both of these in greater detail in future blogs because they can make a significant difference to you if something goes wrong.  Let me know if you have a question or topic suggestion by writing it in the comments section below or posting it on our Facebook page.

Evie Wise
Evie Wise


Evie Wise
Evie Wise

Share this post with your friends

Leave a Reply