Can I upgrade and still collect hold back providing I spend an equal or greater than RCV?
UPDATED: Sep 25, 2015
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Asked September 25, 2015
Whether or not you can collect hold back depends on the terms of your particular policy.
If you have a Replacement Cost Value (RCV) policy, you will collect hold back, or depreciation, as long as you replace the item or items with like kind and quality or better. This means that if you choose to purchase upgrades, you will be reimbursed for the value of similar quality of your lost items, but not the excess cost of the upgrade. If you choose to replace with lesser value items, you will only collect up to the lesser value, and not the full replacement cost of the lost items.
If you have an Actual Cash Value (ACV) policy, no hold back will be paid no matter what the cost of the replacements are. You will be paid the depreciated value of your lost items, and you will be paid this amount whether you actually replace them or not.
It's important to note, you must actually replace the items to collect hold back on an RCV policy. If you choose not to replace, you will collect only the depreciated value, or ACV of the items.
Of course, all this depends upon your policy limit. Nothing will be paid over the dollar amount of your limit, even if the cost to replace your losses is more than that amount. That's why it's important to re-evaluate the value of your possessions regularly and adjust your policy limit when it's appropriate.
This is especially important if you purchase, or even if you're given new items you would want to have replaced if a loss occurred.
For example, if you inherit a valuable piece of art, or someone gives you some designer clothes, or you buy a new expensive home theater system, you will want to make sure your policy limit would not only cover what you already had, but also these new items. If you have questions about whether your limits are adequate to cover your possessions, not just at renewal time but any time during the policy term, give your agent a call and they will help make sure you have the right policy terms and limits for your situation.
Answered October 1, 2015 by BlueSky