A replacement cost policy will pay for the repair or replacement of damaged property with materials of similar kind and quality. The insurance company won't deduct for depreciation-the decrease in value due to age, wear and tear, and other factors. If you own an older home, you may not be able to buy a replacement cost policy. Instead, you may have a modified replacement cost policy. This means that instead of repairing or replacing features typical of older homes, like plaster walls and wooden doors, with similar materials, the policy will pay for repairs using the standard building materials and construction techniques in use today.
Insurance companies differ greatly in how they insure older homes.
Some won't insure older homes for 100 percent of replacement cost because of the expense of re-creating special features like wall and ceiling moldings and carvings. Other companies will insure older homes for 100 percent of replacement cost as long as the dwelling is in good condition. Find out whether building codes in your community have changed significantly since your home was built. Building codes require structures to be built to minimum standards. If your home were severely damaged, you might have to rebuild it to comply with the new standards.