Knowing what methods insurance companies use to decide how much money they will pay after you’ve paid your deductible in the case of a property loss is important information. Somers Agency in Elyria, OH has been providing its customers with a wide variety of high-quality insurance products, including homeowners insurance and life insurance, since 1898. These experts in all things home insurance are here to explain the differences between actual cash value (ACV) and replacement cost.

The ACV is what it would cost your home to be replaced minus the depreciation, which is defined as how much your house has lost in value over time. Talk to the home insurance specialists at Somers Agency about buying ACV coverage and the potential split with lenders if the policy is used to cover a home or other property.

Additionally, it's important to keep in mind that houses tend to cost more to rebuild these days compared to when you initially bought yours. In many communities, developers build a large quantity of similar homes at one time to keep construction costs low.

Because of these trends, a replacement cost policy might be a better option. For instance, if your home burned down, the insurance company would likely pay the entire amount you paid for the property. In this case, the depreciated value would not be a factor in the settlement payment made to you.

Having a replacement cost policy has more conditions than an ACV plan. The professional agents at Somers Agency will gladly walk you through them all. One important feature for most plans is the coinsurance clause, which requires the owner to typically insure the property for at least 80% of its replacement cost. Another is extended replacement cost coverage. This can tack on 25% to 50% of additional protection.

Somers Agency is also your resource for questions about older homes that might need a functional replacement cost policy. Due to age, some insurance companies will only pay the replacement costs by using current and cheaper materials and construction methods.

To learn more about ACV and replacement cost policies, call Somers Agency today at (440) 324-3447. You can also visit their website to get details on their wide range of services, including free home insurance quotes and car insurance quotes as well as business insurance.