A Quick Education On Actual Cash Value And Replacement Cost

It's sad but true - many people only purchase homeowner's insurance because
they've borrowed the money to pay for their home and their lenders require
them to purchase a homeowner's insurance policy until the home is completely
paid for.
Therefore, not everyone who purchases a homeowner's insurance policy puts
much thought into the ins and outs of the homeowner's insurance policy they
purchase.

If you're one of these people, you may not be familiar with the actual cash
value coverage and replacement cost coverage offered by homeowner's
insurance policies; therefore, you might want to take the following
information as a quick education on actual cash value coverage and
replacement cost coverage.

There are two basic ways you can be compensated by your homeowner's
insurance policy. You may be compensated by the actual cash value or on a
replacement cost basis.

If your home or any of its contents are damaged or lost due to a factor
covered under your homeowner's insurance policy, you may choose to be
compensated by actual cash value coverage.
This means you'll be paid the depreciated value of your damaged property.
One reason people opt for actual cash value coverage because they can't, or
don't want to, replace the property that has been damaged.

On the other hand, if your home or any of its contents are damaged or lost
due to a factor covered under your homeowner's insurance policy, you may
choose to be compensated by replacement cost coverage. This means you'll be
compensated the amount of money it will take to replace the property that
has been damaged or lost. The amount you're given is usually the amount it
will cost to replace the damaged or lost property at its current price. You
will be given the amount it will take to replace the damaged or lost
property with another that is similar in type and quality of the one that
was damaged or lost.

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