As its name suggests, homeowners insurance is an essential type of coverage that provides financial protection for your home and property. Although these policies may be customized and tailored to suit your needs and circumstances, there are generally three levels of coverage to consider:
Actual cash value—This type of policy can reimburse you for losses involving your house and possessions but only for their current values as opposed to how much you may have originally paid for them.
Replacement cost—Unlike actual cash value arrangements, these policies do not consider depreciation and can provide financial assistance to repair, replace or rebuild your property or possessions to their original values.
Guaranteed/extended replacement cost—These policies can provide financial assistance to repair or rebuild your home even beyond coverage limits.