Replacement cost and actual cash value are both ways of determining the value of the damaged or lost property when filing a homeowner’s claim.
Here is a look at both types of valuations, as explained by insurer Allstate.
When a homeowner’s policy provides actual cash value coverage, the claim’s value is determined by taking the cost of replacing your personal belongings and deducting the amount of depreciation to the item due to wear and tear.
When the policy provides replacement cost coverage, it means that the policy helps pay for the cost of replacing the item without deducting for depreciation. Most homeowners insurance policies use replacement cost for the structure of the home, which provides the cost of replacing the structure based on similar building materials and similar quality.