Choosing Between Actual Cash Value & Replacement Cost Homeowners Insurance
Homeowners insurance is an essential form of coverage, providing financial protection if your home is negatively affected by weather events or foul play. However, when it comes to choosing between actual cash value and replacement cost policies, there are several factors to consider. Each offers its own benefits, so take a closer look at the following guide to determine which option is right for you.
What Is an Actual Cash Value Policy?
This type of insurance will compensate you for what your home or items are currently worth. It accounts for gradual depreciation due to use and signs of wear. For example, if a TV gets stolen, it will give you the price of what that used TV would sell for versus the cost of a brand-new device.
The benefit of an actual cash value policy is the lower monthly premiums. Homeowners can take advantage of the affordable rates and use the money they would’ve spent to grow their investments. If repairs have to be made, they can pair their savings with the available coverage.
What Is a Replacement Cost Policy?
Replacement cost homeowners insurance accounts for the amount that you would need to purchase a brand-new item. This doesn’t include the additional expense of an upgrade but rather a comparable model to your damaged property.
This more comprehensive coverage offers enough to restore your current lifestyle without having to take from your savings. It does require higher monthly premiums, but the insurance company covers most of the repair costs. Depending on your coverage, there might also be additional provisions. For example, your provider may pay for you to stay in alternate accommodations while your home is undergoing construction.
If you’re interested in setting up a new homeowners insurance policy, reach out to Edwards Insurance Agency of Sparta, WI. They’re a locally owned insurance agency with more than 100 years in business. Their agents are highly qualified and provide coverage for homes, vehicles, and businesses. Featuring some of the industry’s most affordable rates, they offer custom packages that will suit your specific needs. Call (608) 269-4512 to request an insurance quote, or visit their website for additional information on their services.