Replacement Cost vs. Actual Cash Value: Which Home Coverage Do You Have?

Replacement cost coverage pays what it costs to repair or replace damaged property with new items of similar kind and quality. Actual cash value pays replacement cost minus depreciation, which can be much less. Knowing which one your policy uses for your home, roof and belongings matters long before you file a claim.

How does depreciation affect a claim?

Say a 10-year-old sofa would cost $2,000 to replace today. With replacement cost, you could receive about $2,000 after your deductible. With actual cash value, you might receive a fraction of that because of its age.

The same idea applies to roofs. Some Florida policies settle older roofs on an actual cash value basis, which can leave a large gap.

Which parts of my policy might use actual cash value?

Check your declarations page and endorsements for personal property, roof surfaces and other structures. Some carriers apply different settlement terms to each.

If anything is on actual cash value, ask what it would cost to upgrade.

Is replacement cost worth the extra premium?

For most homeowners, yes. The added cost is usually modest compared with the gap you could face after a major loss.

We compare carriers to find replacement cost coverage at a fair price.

Frequently Asked Questions

Does replacement cost pay right away?

Many policies pay actual cash value first and the rest after the item is repaired or replaced.

What is a roof payment schedule?

It is an endorsement that pays roof claims based on the roof’s age and material, which can reduce what you receive.

How do I know what my policy uses?

Look at your declarations page and endorsements, or send them to us for a free review.

Related Reading

• Homeowners Insurance in Florida: What You Need to Know About Roof Age
• Homeowners Insurance in Sunrise, FL: What Affects Your Premium