When you file a homeowner's insurance claim for damage to your property, the amount that gets paid out depends on the limits of your plan and what type of plan you have. The two most common types of plans are based on actual cash value payments and replacement cost payments. While each have their benefits, they're not the same, and it's important to know the difference. This brief guide explains how they function.

Actual Cash Value Coverage

When you get an insurance plan, your home and property are assigned an appraised value. This value represents what your assets are estimated to be worth at the time of appraisal. If you have actual cash value coverage, every time you file a claim with your insurance company for damages made to your property, they base the payout amount on your property's estimated value. 

However, they also take into account potential depreciation, or loss of value from aging.  This actual cash value is meant to account for wear and tear and other factors that would make your property, such as furniture, less valuable than what you initially paid for it.  Typically, this type of insurance plan has lower premiums and lower payouts. 

Replacement Cost Coverage

On the other hand, some insurance plans determine claim payouts based on how much it will cost you to replace the damaged or lost items. These plans agree to replace your property with a new unit of comparable quality and type. Instead of deducting value from your property, they look at what it will cost to buy the contemporary equivalent. 

For example, if you had a 5-year-old TV that was the highest model available when you purchased it, the insurance plan will pay out at the current price of a top-of-the-line TV from a similar brand. It's important to note that your house itself is always covered under a replacement cost plan, even if the rest of your property is not. 

If you're looking to protect your home and your savings with the best insurance plan possible, reach out to Truax Insurance in Ogdensburg, NY. These experienced insurance agents are dedicated to providing you with coverage that meets your needs, no matter where you are in your life. Learn more about their services online, and call (315) 393-3805 to schedule an appointment.