Learn what separates these two coverage options.
When you are in the process of getting homeowners insurance, there are several coverage decisions that you will be asked to make. One of the things you will have to decide on is whether to get actual cash or replacement cost coverage for your personal property. Not sure what each coverage option entails? Here’s what differentiates actual cash value and replacement cost value coverage.
Actual Cash Value
Actual cash value coverage offers compensation for an item based on its depreciated value at the time of loss. Rather than offering you full compensation to replace a covered item, these types of policies only offer compensation for the item’s current value as determined by your insurer. Because this type of policy factors in an item’s depreciation, they tend to offer more limited coverages. While this means that actual cash value policies are more affordable, it also means that you may not be able to replace damaged or stolen items.
Replacement Cost Value
On the other hand, replacement cost value policies offer coverage that will reimburse you for the full value of a covered item. This type of coverage does not take an item’s depreciation into account. In fact, replacement cost values are generally set and agreed upon by all parties before a homeowners insurance policy is finalized. As these policies essentially offer coverage for a brand-new item (regardless of how low the covered item’s value may have dropped), they tend to be on the more expensive side. However, if you are looking to insure high-value items such as jewelry, fine art, electronics, antiques, and so on, then replacement cost value coverage is highly advised.
This is what you need to know about these two personal property coverage options. Do you need assistance with your homeowners insurance? Then turn to the professionals at Patterson & Associates in Richardson, Texas. We are ready to assist you with all your insurance needs. Contact us to get started today.