Share:

Have you recently purchased a house? Homeowners insurance helps you cover the cost of property damages following covered events. There are many different degrees of this coverage available. One choice you'll have to make is whether to get a replacement cost or actual cost value policy. The following guide explains their differences so you can make an informed decision.

What Is Replacement Cost?

This type of homeowners insurance policy will reimburse you for what it would cost to replace an item. For instance, if your appliances were damaged due to an electrical surge, your provider would send you a check that would allow you to purchase the same makes and models new or items of comparable value.

While it’s simple to assign an approximate value to the replacement cost for electronics, furniture, and other similar features, it can be more challenging to value aspects of the home itself. Usually, it would be the cost to rebuild any areas as needed based on current labor and material prices.

What Is Actual Cost Value?

homeowners insuranceActual cost value is the estimated value of an item in its current state. Under this type of homeowners insurance, you’d be reimbursed for items based on what they were worth at the time of the incident, not the price of brand-new replacements.

In most cases, items and home features will depreciate over time, bringing the actual cost value down. However, for certain valuables, including fine art, antiques, and jewelry, actual cost value insurance is a wise choice since their worth often increases with age. Therefore, some owners opt to get a separate policy for these items that is separate from their home coverage.

If the home’s structure itself is damaged, actual cost value policies will account for variables such as preexisting damage and the age of your house. For example, if you had a roof that was 20 years old and a tree fell on your home and damaged it, your reimbursement likely won’t be enough to cover the costs of a brand-new roofing system.

 

Each homeowner has a specific budget and unique needs, which Insurance Savers takes into account. Serving Phoenix, AZ, this trusted agency offers homeowners insurance options from a broad range of providers, giving customers a wide variety of options at competitive price points. Find out more about the full scope of their offerings online. Request a quote by calling (602) 265-9311.

tracking