Replacement Cost Coverage Home Insurance

Replacement cost coverage in home insurance allows you to replace damaged items no matter what it costs on the current market. This can be an important factor, especially when the cost of appliances increases over time. Replacement cost insurance has higher premiums than actual cash value policies. Find cheap quotes for replacement cost coverage in your home insurance policy with our free ZIP code search below.

UPDATED: May 8, 2023

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It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance company and cannot guarantee quotes from any single insurance company.

Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.

UPDATED: May 8, 2023Fact Checked

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Chris Tepedino

Insurance Feature Writer

Chris Tepedino is a feature writer that has written extensively about home, life, and car insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and C...

Insurance Feature Writer

Laura Walker

Former Licensed Agent

Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

Former Licensed Agent

UPDATED: May 8, 2023

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance company and cannot guarantee quotes from any single insurance company.

Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about insurance. Our goal is to be an objective, third-party resource for everything insurance related. We update our site regularly, and all content is reviewed by insurance experts.

UPDATED: May 8, 2023

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance company and cannot guarantee quotes from any single insurance company.

Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.

UPDATED: May 8, 2023Fact Checked

The two ways that an insurance policy can be written for payouts is for actual cash value and replacement cost. Actual cash value pays out a depreciated amount that takes the age and condition of the insured item into account, while full replacement cost will pay to repair or replace the item no matter what condition or age it is.

Replacement cost insurance allows you to replace the damaged item no matter what it costs on the current market. This can be an important factor, because the cost of, say, an appliance will be higher over time, meaning that the actual cost pays for less of the replacement value over time. Replacement cost will replace your stove with an exact or similar model even years after buying the original.

Replacement cost insurance has higher premiums than actual cash value policies. The reason for the higher premiums is to take the rising cost of the item into consideration. And even though you are paying higher premiums, the insurance is still very reasonable when you consider that it would cost you the replacement value out of pocket if you didn’t have insurance to cover it. By contrast, replacement cost will replace the item, while actual cash value will always require you to make an out-of-pocket contribution.

Which type of coverage is best for you depends on your financial situation more than anything else. If you can afford to have replacement cost insurance, you will not be surprised by large costs when you file a claim, but if money is being strictly monitored, actual cost insurance is better than no coverage at all.

Frequently Asked Questions

What is replacement cost coverage in home insurance?

Replacement cost coverage in home insurance is a type of policy that allows you to replace damaged items, regardless of their current market cost. Unlike actual cash value policies that factor in depreciation, replacement cost coverage pays to repair or replace items without considering their age or condition.

Why is replacement cost coverage important?

Replacement cost coverage is important because it ensures that you can replace damaged items at their current market cost, which may have increased over time. This is especially crucial for items like appliances that tend to become more expensive as time passes.

How does replacement cost insurance work?

With replacement cost insurance, if an insured item is damaged, the policy will cover the cost to replace it with a new item of the same or similar kind, regardless of its age or condition at the time of the damage. This allows you to fully recover the value of the item without having to make out-of-pocket contributions.

Why do replacement cost policies have higher premiums?

Replacement cost insurance typically has higher premiums compared to actual cash value policies. The reason for this is that replacement cost policies consider the rising cost of items over time. The higher premiums reflect the higher coverage amount needed to account for the increased market value of the items being insured.

How does replacement cost coverage compare to actual cash value coverage?

Replacement cost coverage and actual cash value coverage are two different ways insurance policies can be written for payouts. While replacement cost coverage allows for full replacement of damaged items, actual cash value coverage takes into account depreciation and pays out a reduced amount based on the item’s age and condition.

Can everyone afford replacement cost insurance?

Affordability of replacement cost insurance depends on individual financial situations. If you can afford the higher premiums associated with replacement cost coverage, it ensures that you won’t be surprised by significant costs when filing a claim. However, if budget constraints are a concern, having actual cash value coverage is better than having no coverage at all.

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Chris Tepedino

Insurance Feature Writer

Chris Tepedino is a feature writer that has written extensively about home, life, and car insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and C...

Insurance Feature Writer

Laura Walker

Former Licensed Agent

Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

Former Licensed Agent

Editorial Guidelines: We are a free online resource for anyone interested in learning more about insurance. Our goal is to be an objective, third-party resource for everything insurance related. We update our site regularly, and all content is reviewed by insurance experts.

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