There are three options to consider when calculating the amount of protection that homeowners insurance will provide. Most standard homeowners policies cover the replacement cost of a home’s physical structure and the “actual cash value” (ACV) of the insured’s personal property. Because depreciation is factored in and the claim payments are generally lower, this is the least expensive option. “Replacement cost coverage” (RCC) provides the amount of money it would take to replace a damaged/destroyed home to the level of the exact same (or similar) home in today’s market. “Guaranteed replacement cost” coverage pays for the cost of rebuilding a home exactly as it was before a damage
incident, even if the cost exceeds the estimated value of the home.
You will want enough insurance to rebuild the structure of your home, to help replace your belongings, to defray costs if you cannot live in your home and to protect your financial assets in the event of liability. The price you paid for your home may be more or less than the cost to rebuild. If the limit of your insurance policy is based on your mortgage, it may not quite cover the cost of rebuilding. Whether it’s personal or business insurance, our office designs and develops total insurance programs. To learn more, please call our office today.
QUICK TIP: Guaranteed replacement cost coverage is not available in all states, and most companies limit the coverage to 120 percent of the cost to rebuild a home.