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  • Writer's pictureCharlotte Burr

Homeowners Insurance Actual Cash Value vs Replacement Cost

Homeowners insurance is different and customizable for every person so it is important to know what your home insurance is covering. To be able to determine this, we need to know the three most common types of homeowners insurance.

Actual Cash Value: Actual cash value or ACV for short, will cover the depreciated cost of your home plus the current value of items on the premises. Hypothetically, if you had a flat screen TV that costed $280 when you bought it but is worth $100 the day it is lost, then the insurance company would only cover $100.

Replacement Cost: Replacement cost insurance covers the cost to rebuild your home plus the money to replace the items on the premises. Relating back to the earlier example above, The insurance company would need to pay you $280 for a new TV even if your current TV has depreciated below that price.

Guaranteed Replacement Cost: This type of insurance offers to pay for the repairs or replacement of your home and its items even if it costs more than your limit! This policy is often used to combat inflation for costs of services like the construction to rebuild or repair your home. Although these policies do have a percentage limit on how much the insurance company is willing to cover, guaranteed replacement cost insurance protects your home and assets the most of the three. But these policies are not common.

Independent insurance brokerage located in Tempe, AZ. We offer auto insurance, homeowners insurance, life insurance, renters insurance, commercial insurance…

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