ACV vs. Repair Cost

[Daniel H.]

In the city where my property is located, there are many three-story apartment buildings with a unit on each floor. These are no longer allowed to be built new in the city. So replacement cost of my two buildings is $450,000 each. I paid $82,500 for each building.

They are currently insured with replacement value but I am thinking of switching to actual value. If one of the buildings burned down I do not plan on rebuildsang. Actual value would cover my loan amount and I could just go purchase a new property, right?

Is there any reason that I am missing why I would want replacement cost?

What if there was partial damage, like a tree falling through part of the roof? How would that be covered with ACV vs. Repair cost with the numbers I mentioned above?

[Timothy W.]

Assuming your building valuations are correct, the following applies:

If one of your buildings burns down, your insurance payout maxes out at 82,500 at ACV. Your max payout at RCV is 450,000. That's the simple part.

The complicated part is when you have damage that doesn't destroy the building. Let's say you have to replace the roof from a wind storm. Let's say it's $40,000 in repairs. Let's say it's depreciated 50% due to its age. On an RCV, your insurance payout is $40,000 less your deductible. On ACV it's $20,000 less your deductible and you come up with the rest. It's done the same no matter how big or small the claim.