Replacement Cost vs. Cash Value for Homeowners Insurance

Homeowners insurance protects the investments you've made in your property and other assets by providing compensation after theft, damage, or other issues. Understanding the differences between policies that offer replacement costs and cash value can help you choose the appropriate coverage for your needs.

Replacement Cost Homeowners Insurance

If you choose this type of policy, you will receive the replacement cost of your stolen or damaged property. Your insurance company will provide a settlement that covers the cost of buying new items to replace the damaged goods. If your home becomes a total loss after a catastrophic event, replacement cost insurance covers the full expense of constructing a new structure of comparable quality. Because of this, the premiums for these policies tend to be higher than those for cash value policies.

Cash Value Homeowners Insurance

These policies offer you cash for the current value of a damaged or lost item when you file a claim. For example, if your home must be rebuilt, the insurance company will pay the market value of your home rather than the cost to rebuild a new home of the same quality. The same goes for your other possessions. If you need $1,000 to buy a new couch but the damaged one has an estimated value of $500, your insurance payout would be $500 for that item. If you choose this type of coverage, you may need additional insurance for items that are uniquely valuable and appreciate over time, such as artwork, antiques, classic cars, and other collectibles.

To learn more about your options for homeowners insurance, schedule a consultation with the team at Connell & Curley Insurance Agency Inc. We've been serving clients in Natick, MA and the surrounding areas for more than five decades. Call (508) 655-1112 or complete our online form to request an appointment for an insurance quote.