2. How does a Replacement Cost policy differ from a Actual Cash Value policy?
Replacement Cost in Homeowner’s Insurance
Homeowners insurance is an important line of protection for your home and property – but what does a policy actually cover? A key component of homeowners insurance is your replacement cost which is designed to protect you from the costs of rebuilding or replacing your home if it were destroyed due to a covered event.
What is Replacement Cost Coverage?
Replacement cost coverage is another term for mortar and brick coverage. It is the part of your homeowner’s insurance policy that covers the cost of rebuilding your home in the event it is destroyed due to a covered event – like a fire or storm. This coverage will include the costs to rebuild and also consider inflation of construction costs.
What is Replacement Cost Value?
Replacement cost value is the cost that it would take to replicate or rebuild your home and any outbuildings, such as a detached garage, at current construction costs. It does not reflect the market value of a home, which is usually much higher than the replacement cost.
What Does Replacement Cost Coverage Include?
Replacement cost coverage will protect your home in the event that it is destroyed and needs to be rebuilt – but it will also sharpen your protection by covering the following items:
- Appliances – Replacement cost coverage will cover the cost to replace any onsite appliances, i.e. refrigerators, ovens, washers and dryers.
- Furnishings – Replacement cost coverage will cover the cost to replace any furniture damaged or destroyed by a covered event.
- Repair Costs – Replacement cost coverage will also cover the cost to repair any damaged items such as carpeting or drywall.
Replacement cost coverage is an important part of a homeowners insurance policy, providing financial protection in the event of disaster. Be sure to review your policy and understand the details of your replacement cost coverage to ensure your home and belongings are fully protected.