Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Apr 3, 2022

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Home Insurance Replacement CostWhen it comes to home insurance, replacement cost refers to how much it will cost to rebuild a home or replace property after a loss.

This figure is different from the purchase price, since the cost of replacing the home or the item may be higher or lower than what the owner paid at the time.

Consumers should consider buying a policy offering coverage for replacement cost, especially when it comes to homeowners insurance.

Replacement cost is different than actual cost value (ACV) so read on to learn the difference between actual cost value and replacement cost in a homeowners insurance policy.

Also, be sure to enter your zip code above for free online insurance quotes!

Actual Cost Value Replacement

Some insurance companies will offer to cover personal items on an actual cash value basis. This means the policy will pay out an amount equal to what the item was worth at the time of the loss, less the policy deductible. Determining the item’s value as of the date of the loss involves considering normal wear and tear, as well as the age of the item. Of course, that does not mean that the amount is enough to go out and buy a new version of the item.

Even if the loss occurred shortly after purchasing an item, its value starts to depreciate when the owner takes it home. In the case of items like furniture that the homeowner has owned for a number of years, the actual cash value may be negligible after a loss.

The value of the property in question may be cause for a dispute between the insurance company and the policyholder after a loss. The insurance company and/or the adjuster assigned to the file may have different ideas about an item’s value than the owner does. Sadly, sentimental value is not included in actual cost of an item.

Buying a policy with coverage for replacement cost will be more expensive, but it provides a higher level of protection for the policyholder. Shopping around for coverage can help a person on a limited budget to get a better quality of protection for his or her property.

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Replacement Cost for Personal Property

Insuring personal property for replacement cost means that if the item is damaged or stolen, the insurance company will pay for a new one. Rather than receiving a check for the value of a couch that may be several years old and has been through a lot of punishment during that time, the policyholder who has replacement coverage can buy a brand new one.

A person who buys a policy with replacement cost coverage will be asked to provide very specific information to the insurance company when making a claim. He or she will need to demonstrate that they owned the property included in the claim. For the insurance company to determine the replacement cost, having detailed records will definitely help.

Policyholders can make an inventory of their property by listing the items and taking pictures of them. They can also record their belongings using a video camera. Keeping receipts for items bought is also a good idea, since it provides the insurance company and the adjuster with a base to work with.

If you decide to put together an inventory of your belongings, it’s a good idea to store it off site. A safety deposit box or other secure location means that you can access your records when you need to without having to be concerned that they will be damaged or destroyed by fire, flooding or another type of disaster.

Home Insurance Policy Inclusions & Exclusions

Before you make the decision to buy a home insurance policy, be sure to ask whether you are covered for cash value or replacement value following a loss. Don’t assume you have replacement coverage; finding out that you don’t have it in place after a loss would only make an already difficult situation much worse.

Your homeowners policy will probably cover you for the contents of your home, including the furniture. Some items, such as jewelry, paintings, coin collections and furs, may need to be covered under a separate insurance rider. The cost of rebuilding the structure of the house itself should be covered. Some policies will also cover sheds or outbuildings on your property as well. Even renters should have a policy to cover their personal possession, as the land lord’s policy will only cover the structure of the domain.

Before making a decision about homeowners insurance coverage, review quotes you have received carefully. Make sure you understand what you are covered for, and what the policy exclusions are. If you have any questions or concerns about the coverage, contact the insurance company or your agent to get them dealt with before committing to the policy.

Shopping around for replacement cost coverage is a great way to find the right policy for your needs. Each insurance company sets its own rates and pricing can vary greatly, depending on the provider. To find out what you can expect to pay for this valuable protection, why don’t you click on the free insurance tool on this page right now?