Your home is probably your most valuable possession. So it’s important to make sure you are properly insured so that in the event your home is destroyed or damaged, your homeowners insurance will cover 100 percent of the cost to replace or repair it. When purchasing homeowners insurance, you can have your home and its contents insured by one of two methods: “replacement cost” or “actual cash value.”
Replacement cost refers to the amount it would cost to replace or rebuild your home or repair damages, using materials of a similar kind and quality, without deducting for depreciation (the decrease in value because of age, wear and tear). If you are adequately insured and have replacement cost coverage, your home will be replaced or repaired to its prior status.
If you file a claim and the basis of coverage is actual cash value, this is the amount of money the insurer would pay you after having subtracted depreciation. For example, imagine your 10-year-old roof is destroyed and would cost $30,000 to repair. Assuming your 10-year-old roof had a useful life of 20 years and the actual cash value is your basis of coverage, the insurer would only be required to pay you $15,000, representing the “actual cash value” of the roof.
Give E. R. Munro and Company a call at 1-877-376-8676 and we can help you determine which coverage is right for you and your budget.
