If you don't, you may discover you are underinsured when you have a claim. You should also evaluate your personal belongings and ask your agent about the options for covering these items. Finally, most homeowners' policies include personal liability protection. Be sure to speak with your agent concerning your liability coverage needs. Replacement Cost is the amount to repair or replace the damaged property using materials of like kind and quality, without deduction for depreciation.
Depreciation is the loss of value that develops as an item ages or wears.
Actual Cash Value is the replacement cost of an item, less the amount for depreciation. A new option available to consumers is modified or functional replacement cost . At the time of a loss, modified replacement cost will restore the home to a functional condition. This may mean that unique features in your home prior to a loss will be replaced with items that serve the same function, but are not aesthetically the same. In most cases, insurance companies have the option to replace the item, if possible, through their vendor of choice.