(800) 253-1482For Texas Home Insurance – What Is Replacement cost vs Actual cash value coverage?
- Replacement cost coverage pays to repair or replace your house and personal property at current prices. For example, say you bought a new roof 10 years ago and the current price for a new roof is $10,000. If you have to replace your entire roof after a storm, a replacement cost policy would pay for a new roof at today’s prices. If you have a $2,000 deductible, your company would pay $8,000.
- Actual cash value coverage pays replacement cost minus depreciation. Depreciation is a decrease in value because of wear and age. In the same example of the 10-year-old roof, the actual cash value might be $7,000. After your $2,000 deductible, your company would pay $5,000. You’d have to pay the rest of the cost of the new roof yourself. This means your total out-of-pocket costs for an actual cash value policy would be $5,000, compared with $2,000 for a replacement cost policy.
