Seeking Guidance on California Earthquake Insurance: ACV vs. RCV
I’m looking for some advice about earthquake insurance in California, specifically the differences between Actual Cash Value (ACV) and Replacement Cost Value (RCV).
I recently received a quote for earthquake insurance for our home through the California Fair Plan, assigned to me by an insurance broker. I was clear with her that I prefer RCV because, in a catastrophic event like a major earthquake in Los Angeles, I doubt we could rebuild within the allotted 365 days. Factors like high demand and potential tariffs would likely cause significant delays. Additionally, my husband is not keen on living here longer, so we would probably consider moving instead.
I reached out to my broker via text, asking for comparisons of different deductibles (I had initially received a quote for the 25% deductible) and also inquiring whether the policy payout would be RCV or ACV if we decided not to rebuild. Her response was that it would be RCV. I then confirmed that we would like to proceed with the 25% deductible based on that information.
After uploading necessary documents and setting up payment, we agreed on the 25% deductible. However, when the finalized documents came through today, I found the following language regarding how losses will be settled:
F. LOSSES WILL BE SETTLED AS FOLLOWS:
- DWELLING AND OTHER STRUCTURES
a. Loss to property will be settled at “replacement cost” for the amount actually incurred to repair or replace such property at the “residence premises,” with limitations outlined in the policy.
b. Payment will be subject to the deductible but will not exceed the smallest of the amounts listed for dwelling or other structures damages caused by an earthquake.
c. You can claim under actual cash value, but to claim replacement cost, you must notify the insurer within 180 days of the loss and complete repairs within 365 days.
Given my persistent inquiries confirming RCV in case we don’t rebuild, this language has raised doubts. I’ve since emailed the broker, outlining my concerns and seeking clarification on several points:
- Will we receive the full RCV payout if we choose not to rebuild?
- Is there flexibility in the 365-day deadline, especially considering potential delays in rebuilding due to high demand?
- If we opt for a cash payout without rebuilding, will we only receive ACV instead of RCV?
Her initial response assured me that, in the event of a total loss, I would be eligible for the full RCV payout, even if I chose a cash option instead of rebuilding, and stated that there are no depreciation clauses affecting that payout.
However, based on the contract language, it seems unclear to me whether we would actually receive RCV or be limited to ACV if we ultimately decide to move instead of rebuild. This raises concerns about whether we are being misled.
Could someone with a better understanding of insurance terms and policies take a look at the contract language above and provide insight on whether my fears about potentially being pushed toward an ACV payout are justified? It feels like a possible bait and switch, but I might be misinterpreting. Any clarification would be greatly appreciated!
It sounds like you’re doing a diligent job advocating for yourself regarding the earthquake insurance policy, and I can understand your concerns given the significant implications both ACV and RCV can have on your financial recovery after a disaster.
From what you’ve posted about the language in the policy, here are a few key points to consider:
Replacement Cost Value (RCV) Clause: The contract clearly states that RCV is paid for repairs or replacements made at the same premises or for replacements elsewhere. However, it also emphasizes that “actual cash value” will be payable unless repairs or replacements are done as outlined. This seems to imply that if you don’t rebuild, the payout could potentially revert to ACV.
Proof of Repair/Replacement: The requirement to provide proof that repairs or replacements have been made within a year adds to your concerns. The fact that RCV payments are contingent upon repairs being completed and that cash payments without rebuilding default to ACV suggests that without rebuilding, you may not receive the full amount you were quoted.
Potential for Bait and Switch: Your broker’s assurances about RCV, despite the policy language suggesting otherwise, do give you reason to be cautious. It’s essential to get written confirmation that you’d receive the RCV payout even if you choose not to rebuild.
Flexibility of the 365 Days: Your concerns about whether 365 days is realistic, especially in the aftermath of a significant quake, are valid. Your broker needs to clarify if there are provisions for delays in rebuilding, especially given current conditions and the market for contractors might change.
Clarification Needed: You’ve done well to ask detailed questions. I would emphasize the need for clear, written affirmation from the insurer that RCV applies in your specific case, even if you opt not to rebuild. This should include specifics about how claims will be handled in that scenario.
In summary, while your broker has verbally confirmed RCV eligibility, the written policy language appears to indicate limitations that could affect your payout if you choose not to rebuild. It’s crucial to have everything clarified and confirmed explicitly in writing before proceeding. Should their response not satisfy you, it might be worth consulting with a professional, such as a lawyer specializing in insurance, for a more definitive interpretation of the contract.