05 Jul 2018
Learn the Difference Between Actual Cash and Replacement Cost Value

Here’s the difference between actual cash value and replacement cost value and what this means for your homeowners insurance coverage.

When you are getting homeowners insurance, there are several important coverage decisions that you will have to make. One of these decisions is choosing how much coverage you would like for your personal belongings. When your insurer asks if you’d like actual cash value or replacement cost value coverage, you might not understand what these options entail. To help your make an informed decision, here’s what you need to know about these two types of coverage.

Actual Cash Value

Actual cash value policies offer coverage for an item based on its current value. This means that your insurer will offer you compensation for an item based on its value minus depreciation. Because these policies offer less coverage than their replacement cost value counterparts, they tend to be more affordable. However, relying on this limited coverage might mean that you cannot actually afford to replace high-value items if they are stolen or damaged.

Replacement Cost Value

Replacement cost value policies offer coverage that will reimburse you for the full value of a covered item. These policies do not factor in an item’s depreciation, essentially offering you coverage for a brand-new item no matter how low the item’s current value might have dropped during your time of ownership. Replacement costs are generally set and agreed upon by all parties before a homeowners insurance policy is finalized. As these policies offer full coverage, they are more expensive. However, if you want to insure high-value items such as jewelry, fine art, antiques, electronics, and so on, getting this coverage is highly advised.

This is the difference between actual cash value and replacement cost value.  Do you need further assistance with your homeowners insurance?  Then don’t hesitate to contact the experts at Weaver & Associates in Arcadia, California.  Our dedicated team is ready to address all your insurance needs today.