The overwhelming amount of options you’ll find when shopping for homeowners insurance can make it difficult to decide what kind of coverage is right for your particular property. There are many factors to consider, but one of the most important details is how the insurance company will compensate you in the event of a loss. You have to decide whether you want to be reimbursed for actual cash value or replacement cost, but before you choose, it’s essential to understand the difference between the two. NorthEast Insurance Services is committed to helping clients in New York, New Jersey, and Pennsylvania find the most suitable protection for their homes.
The company’s experienced insurance agents explain the following points about the repayment options:
- Actual Cash Value Vs. Replacement Cost: A homeowners insurance policy that offers actual cash value will give you the amount that your home or belongings are currently valued at, short of what is taken out for depreciation. Replacement cost coverage will give you the amount it would take to replace your personal property should you pay market price for it today.
- What It Means: If you choose to go with actual cash value, you will be paid at the depreciated value of your property. Regardless of how much you originally purchased the item for, depreciation will be calculated and deducted depending on the number of years you owned the item. With replacement cost, depreciation is not a factor, and reimbursement calculations are based on the cost to replace that item today or the cost of construction.
- How To Choose: Whether you choose actual cash value or replacement cost, coverage will depend on your individual circumstances. Actual cash value policies tend to be less expensive, but will likely leave you paying out of pocket for repairs or replacements to make up for the depreciation deduction. On the other hand, for a higher premium, replacement costs will provide the funds you need to completely rebuild or restore your property.
As you’re deciding which kind of homeowners insurance policy is best for you, think carefully about your assets and what you will have to replace should disaster strike. Contact Northeast Insurance Services at (732) 972-1771, or visit their website for a complete list of insurance products.