Actual Cash Value vs. Replacement Cost

Actual Cash Value vs. Replacement Cost

Common question: What is the difference between “actual cash value” and “replacement cost“?

Covered losses under a homeowners policy can be paid on either an actual cash value basis or on a replacement cost basis. “Actual cash value” means the owner is entitled to a depreciated value of the damaged property. Under “replacement cost” the policy owner is reimbursed the amount necessary to replace the damaged property with one of similar type/quality at current prices.

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