Getting quotes for a homeowners’ insurance policy can be daunting due to all the variables you have to consider. Reviewing a policy and understanding exactly what it covers can help you make an informed decision about what policy is best for your Lilburn, GA, home.
One thing that you should pay close attention to is the basis used for determining replacement amounts when you file a claim. The policy will note this as either actual cash value or replacement cost. While they both provide coverage, there are some major differences.
Understanding Actual Cash Value
An actual cash value policy takes the item’s depreciation into account when determining the coverage amount. This means that if you have an item that was purchased for $1,500 but has depreciated by $500 since then, the item is only covered for the $1,000 of remaining value.
What is the Replacement Cost Basis?
The replacement cost basis doesn’t take the item’s depreciation into account. Instead, you’ll receive the full replacement cost of the item. So, the $1,500 item would be covered at $1,500 instead of the $1,000 coverage that occurs in an actual cash value policy.
Cost of the Policy
The policy cost varies with the coverage type. Typically, you’ll pay a little more for a replacement cost basis policy than you would for an actual cash value policy. Which one you choose should depend on your finances and how likely it is that you’ll want to replace your items with comparable ones if you have to file a claim.
Contact our professionals at Garrison Insurance Group to determine which type of coverage will be best for your policy.
