When you are looking at home insurance options in Selden, New York, it is likely that you will need to select between the actual cash value of items or the replacement cost when items are insured. By understanding the difference between your coverage options, it is easier to make a decision.
Actual Cash Value
The actual cash value of an item is usually defined as the cost of replacing the item minus any depreciation on it since the time it was purchased. For example, if the fair market value for a new television is $500 and the depreciation was $200 on the old set, then the insurer would provide $300 for the item.
The replacement cost refers to the total amount it will cost to replace the item with the same model or a similar model if the same model is not available. That means if the television costs $500 to replace, then the insurer will provide $500 for the item.
Variations Between Insurers
The calculations for depreciation and the actual expense of replacing an item may vary between insurers. Before assuming that a specific insurer is better, take the time to ask about how depreciation is calculated and how the insurer determines the actual market value of the item. Different companies may offer a variety of calculations that make the estimation for replacement a little complicated.
Getting the right coverage for a house can seem complicated, but recognizing the terminology that the insurers use in the policy will help reduce the risk of getting the wrong plan. When it seems complicated or hard to understand, an independent agent can answer questions or provide more information about the coverage. To learn more, contact us to talk to an agent today.