Your home is protected by dwelling coverage (also called “Coverage A”). The amount of dwelling coverage is usually based on the cost to rebuild your home. Most standard policies cover your home at Replacement Cost Value (RCV). That means if your home is insured up to $250,000, then you may get up to that amount to rebuild if your home is destroyed. Just make sure your dwelling coverage amount is enough to cover you in case a complete rebuild is necessary.
Your belongings
Your belongings are covered by “personal property” coverage on your policy. When insuring your belongings (meaning everything you own inside of your home and in storage), you can choose between Actual Cash Value (ACV) and Replacement Cost Value (RCV). Most insurance policies default as ACV, but you can usually switch to RCV for an increased price. For example, if you paid $5,000 for a new couch 10 years ago, and it was destroyed in a fire, the ACV options would typically pay the current value of the couch (cost less depreciation) whereas the RCV option would typically pay what it costs to replace your couch, which could be more or less than $5,000, minus your deductible.
Which option is best?
Like most insurance questions, it depends on your situation. Actual cash value insurance is usually the more affordable option. But, ACV may not offer enough coverage if something is damaged. The payout amount you’ll get from your insurer will likely be higher with replacement cost insurance. So, it’s a trade-off.
P: (303) 456-5047
F: (303) 284-7058
Office:
7828 Vance Dr #205
Arvada, CO 80003