When choosing the correct insurance policy, it’s important to understand the difference between actual cash value and replacement cost coverage. If you are trying to make a claim it will make a big difference in your out of pocket expense when you are replacing your damaged possessions.
Here Are Some Options
When choosing the replacement cost coverage, you’re going to receive what it’s going to cost to purchase the equivalent. Now with having actual cash value coverage, you’ll receive the replacement cost less than the decrease in value as the item starts to age.
Example: Your new dining room set is destroyed in a house fire. When having replacement cost coverage, you will be able to receive what it would cost to go the furniture store today and buy a new dining set that is comparable in quality as to what you had before. When having actual cash value coverage, the insurer will consider the wear and tear of the set and only pay you a depreciated amount instead. Although it could cost you more to purchase now than what it originally cost you. You’ll receive only the amount the old set was worth if you had sold it on the open market before it was destroyed.
With the amount of depreciation it is established by the insurance company that is based on a number of factors. Which includes: what the item is, original cost and the age, as well as the wear and tear experienced over the years.
The Cost Benefit
Replacement cost policies go on average about 10%-15% more cost, which in most cases they will be worth the difference. Principle behind the replacement cost is to ensure you to avoid the costs of depreciation. Most often with the replacement cost policies you will be offered the higher limits for coverage. If all of your belongings need to be replaced, this difference in reimbursement will quickly add up. Contact your local Brazelton Insurance Group for more details and speak with an agent today.