Why might clients prefer Replacement Cost coverage over ACV?

Clients might prefer Replacement Cost coverage because it provides a higher payout in case of loss. This type of coverage reimburses the policyholder for the cost of replacing an insured item without deducting for depreciation. In contrast to Actual Cash Value (ACV) policies, which consider the item's depreciation in their payout calculations, Replacement Cost coverage removes that factor entirely, allowing policyholders to receive a full or nearly full recovery of what it would cost to buy a new equivalent item.

ACV calculates the payout based on the item's current value, factoring in wear and tear, which often results in a lower claim settlement. Thus, with Replacement Cost coverage, clients feel more secure knowing that in the event of a loss, they will be able to replace their property fully, ensuring that they can restore their situation without a significant financial burden.

The other options do not represent the primary reasons why clients would opt for Replacement Cost coverage. While it may sometimes be more expensive than ACV, it’s not always the case that it's “always cheaper.” Depreciation is explicitly not included in Replacement Cost calculations, making it less relevant in this context. Lastly, limiting claims to specific items contradicts the broader coverage that Replacement Cost typically offers, which focuses on replacing items rather