What Is Replacement Cost In Home Insurance?

  1. 21750 POINTS
    Jim Winkler
    CEO/Owner, Winkler Financial Group, Houston, Texas
    Great question! Homeowners and renters policies will define the payout for your belongings in most cases as either "replacement" or  "actual cash" value. There can be a big difference between the two, and as the insured, you'd like "replacement", and as the company, the "actual cash". Here's why: Let's say you have a laptop that you bought a couple of years ago, and it's seen better days, it doesn't run quite as quickly as it did, and has a few dings and dents. When it comes time to replace it, replacing your computer with a new version of it is what you would get with "replacement value". With "actual cash value" the company would take a look at the price for the new computer, and subtract off the depreciation cost for the length of time you had the old one. You might have to settle for a lesser laptop, or pay the difference in this case to receive the same laptop that the "replacement" version would have provided. This is a simplified explanation, but should give you a good understanding of the differences. If you would like more info, just hit the contact me button, I'd be happy to help. Thanks for asking!
    Answered on April 11, 2014
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