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Learning About Actual Cash Value Vs. Replacement Cost Value

Here’s what you need to know about the difference between actual cash value and replacement cost value.

When it comes time to get homeowners insurance, there are a lot of coverage decisions you will have to make. However, with all the coverage options out there, it can be difficult to know which policies are right for you. For instance, if you are asked to decide between actual cash and replacement cost coverage, you might not know what each option entails. Here’s what you need to know about these types of policies.

Actual Cash Value

This type of policy offers coverage based on the current value of your belongings. This means that the policy will offer coverage for an item based on its value, minus depreciation. Because these policies offer less coverage than their replacement cost value counterparts, they also tend to be more affordable. However, this limited coverage means that you may not be able to actually replace high-value items if they are stolen or damaged.

Replacement Cost Value

On the other hand, replacement cost value policies offer coverage that will compensate you for the full value of a covered item. These policies do not factor in depreciation, essentially offering you coverage for a brand-new item regardless of how long the covered item has been in your ownership. Replacement cost values are generally set and agreed upon by all parties before a homeowners insurance policy is finalized. As these policies offer full coverage, they tend to be on the more expensive side. However, if you need to insure high-value items such as fine art, jewelry, electronics, antiques, and so on, then getting replacement cost value coverage is recommended.

These are the major differences between actual cash and replacement cost value.  If you need help making this important coverage decision, then don’t hesitate to contact the experts at Scautub Agency in Scotia, New York.  Our dedicated team is ready to get you the coverage that you need today.

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