Home Policies: Replacement Cost or Actual Cash Value
Home Insurance is designed to repair or rebuild your home based on current reconstruction costs. This type of policy is called replacement cost. But some policies pay less based on the age and condition of your home, taking into account the home’s depreciation. This type of policy is called actual cash value coverage.
Knowing the difference can make a BIG DIFFERENCE when you have a claim!
*The examples below are intended for illustration purposes only
Replacement Cost Coverage:
If it costs $15,000 to replace the roof, a replacement cost policy will pay the same amount (minus the deductible) no matter how old the roof is:
| Cost to Replace Roof | $15,000 |
| Deductible | -$4,000 |
| Policy Payment | $11,000 |
Actual Cash Value Coverage:
If it costs $15,000 to replace the roof, the amount an actual cash value policy will pay depends on how old the roof is:
| 5-year old roof | 10-year old roof | 20-year old roof | |
| Actual Cash Value of Roof | $12,000 | $8,000 | $4,500 |
| Deductible | -$4,000 | -$4,000 | -$4,000 |
| Policy Payment | $8,000 | $4,000 | $500 |
If you need help or have questions about Homeowners Insurance – call one of our Property and Casualty Specialists at the either location for a free review.