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Replacement Cost vs. Actual Cash Value


Replacement Cost coverage is very different than Actual Cash Value coverage. RPL Cost Coverage has the intent to put you back to where you were before the loss. Therefore the premium and limits of coverage are not based on the current resale value of your building. They are based on the cost to rebuild similar size and quality without allowing for any deduction of depreciation. Replacement cost coverage includes the cost of new materials, today’s labor costs, debris removal, site accessibility, winter heating while under construction and current building codes. Actual Cash Value is based on age, size and quality of the building, condition and use, location and the selling price of surrounding properties.

Most Comprehensive Homeowners policies today guarantee the replacement of your home if you are insured to full replacement cost according to industry standard rebuilding cost evalurators. This is a great benefit because if the cost to rebuild is higher than the limit of coverage on your policy, the insurance company will pay these extra costs to put you back in the same situation you were prior to the loss. This means no out of pocket costs for you.Be sure to seek advice and purchase insurance from those who understand your business!