Although replacement-cost coverage insurance for home owners is designed to replace your valuables and your home, sometimes the payout isn’t equal. To avoid coming out of the situation less than fortunate, MoneyWatch.com recommends staying away from actual cash value coverage, or ACV. ACV includes a deduction for depreciation that typically pays only 20 percent of the cost of a replacement item of comparable quality.
Instead, look for home insurance quotes with extended replacement cost policies. This buffer usually increases the amount by 20 percent to 25 percent beyond your policy limits. The extra coverage will increase your premiums by about 10 percent, according to the Insurance Information Institute.
“But with the average homeowner’s insurance premium running $764 a year, the risk/reward calculation can be attractive. For example, if you find yourself in a widespread disaster such as a wildfire or hurricane, local builders will be in great demand, and that can drive up construction costs.”
For a free home insurance quote that includes extended replacement cost, contact your insurance agent today.