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Replacement Cost Vs Actual Cash Value

If you have a Homeowners Insurance Policy, you should know your policy's settlement provision for personal property. Replacement Cost coverage will replace your damaged or stolen items of like kind and quality. Actual Cash Value provides coverage only for the current value, which factors in depreciation.

For example, a tree falls through the roof onto your eight-year old washing machine. If you have a Replacement Cost policy for contents of your home, the insurance company will pay to replace your damaged washing machine with a new one. If you have an Actual Cash Value policy, the company will pay only the value of the used machine. That means you will have to either buy a used machine or pay the difference between what your insurance company paid you and the cost of the new machine. Check your policy under Section 1, Conditions, Loss Settlement or ask your agent or insurance company representative.