Homeowners actual cash value versus replacement cost coverage

Most homeowenrs policies resolve personal property claims on an actual cash value basis. Belongings typically lose value over time. Depreciation calculates this decreased worth. Perhaps your three-year-old television is zapped by lightning. An ACV loss settlement starts with establishing replacement cost for a similar tv. This figure is reduced according to the depeleted life of your tv. Salvage value, if applicable, decreases the actual cash value claim settlement. Many companies ofer contents replacement cost as buy-back coverage. Get in touch with your local agent for more details.

Traditional homeowners policies settle structural losses on a replacement cost basis. Replacement cost is how much it takes to rebuild, replace, or repair damage. Building materials and labor costs affect replacement cost. Structural claims may be paid on an actual cash value basis initially. The difference between ACV and replacement cost is dispersed when work is complete.

Confirm your policy's dwelling limit provides enough coverage for your home. It is best to insure the structure for its full replacement cost. A total loss cannot exceed the policy's dwelling limit. Underinsuring your home may result in a claim settlement far below the amount you need to rebuild or make repairs.

Consider adding an extended or guaranteed replacement cost endorsement to expand dwelling coverage above the policy limit. Extended replacement cost typically restricts the settlement to 10 - 20 percent above the policy's dwelling limit. Guaranteed replacement cost has no limit. Ask a local agent about these optional add-ons.