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Actual Cash Value vs. Replacement Cost

Your home insurance policy should give you the coverage you need to best protect what matters most. But there are a lot of coverage options out there. Understanding what those are helps you select a policy that’ll give you the protection you need to repair or rebuild after a major covered loss. Have questions on how much coverage you’ll need? Understanding actual cash value vs. replacement cost can help.

What is actual cash value? Actual cash value refers to an estimate of what the fair market value is minus any depreciation for things such as age, condition and obsolescence.

What is replacement cost? Replacement cost is an estimate of the amount it will cost to repair or rebuild your home. The replacement value of your home can fluctuate — depending on several factors. If you’ve upgraded the property with an addition, a shed, a new deck or landscaping, you’ll want to let your insurer know so your policy can reflect the upgrade. There are also factors out of your control that may affect your replacement cost, such as inflation, local supply and demand, and the availability of local contractors.

The goal of replacement cost is to protect and restore you and your family to your home and day-to-day routines.

Connect with your American Family Insurance agent to make sure you have the right homeowners insurance coverage to protect your home and the dreams inside.

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Related Topics: Insurance Terms , Insurance Needs , My Account