What is the difference between actual cash value and replacement cost coverage?
I'm shopping for homeowners insurance and I have seen quotes that cover my personal property in two different ways; actual cash value and replacement cost. Which one should I choose?
There is a huge difference between the two valuation types when it comes to homeowners insurance. Let's use an example of a camera.
- Replacement cost coverage means you would receive the amount of money it would take to replace your personal items brand new. If your 2-year old camera is stolen then you would receive the amount necessary to replace the camera with a brand new version.
- Actual cash value (sometimes written as ACV) means that the amount you receive for your personal items would take depreciation into account. If your 2-year old camera is stolen then you would receive an amount based on the age of your camera.