Homeowner policies include coverage for your personal property which includes items such as clothing, electronics and furniture etc. There are two types of coverage options for your personal items. Replacement cost and actual cash value refers to how your homeowner policy reimburses you for damage to your personal items after a covered loss.
Replacement cost compensates for the actual cost of replacing damaged item with new, similar item. The policyholder provides a receipt when he purchases the replaced item. Actual cash value compensates on the replacement cost less depreciation. This is also known as fair market value. The insurance will pay to replace items up to the personal property limit in your policy.
Premiums are lower with the actual cash value option as the company pays less in the event of a claim. Replacement cost does increase the premium but in the event of a claim, you will get what it costs to replace the damaged items.
You should inventory your items to determine which coverage suits your needs and discuss with your insurance consultant.
If you have any questions, please feel free to call us at (561) 994-0880.