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Insurance Type

There are two main types of home insurance, known as replacement value and actual cash value. At MTC Insurance Agency Group, serving the greater University Place, WA community, we offer many types of insurance, including home insurance.

Similarities Between Actual Cash Value and Replacement Cost

Both actual cash value and replacement cost will reimburse you if your home, property, or possessions are damaged, lost, or destroyed due to a covered loss.

Actual Cash Value

An actual cash value policy will reimburse you for the actual value of the damaged property, including your home, property, and possessions, up to the coverage limit.

The value you are reimbursed will change over time, as the covered items go up or down in value. Your home may increase in value over time. However, personal belongings usually decrease over time, which is known as depreciation.

Replacement Cost

Replacement costs will reimburse based on how much it will cost to replace your home or items. If your home is damaged, this coverage will allow you to replace the items or areas of your home with those of a similar price and quality.

Replacement cost doesn’t take depreciation into account.

Which is Better?

Replacement cost is typically considered the best option. If your home is destroyed, for example, the replacement cost will allow you to purchase a home similar to the one you owned.

Actual cash value, on the other hand, will only reimburse you for the amount your home is worth, which is often less than the cost to replace your home.

Replacement value is also a better choice for your personal belongings. If you purchased a new TV a few years ago, it has gone down in value significantly.

If you replace it with a similar model, you’ll pay more than the actual value of your TV. With an actual cash value policy, you must make up this difference. Replacement value coverage will cover the cost of a new TV that is the same or similar.