Luxury Home Insurance: Replacement Cost Vs Actual Cash Value

With replacement costs often exceeding $750,000, high-value homes typically represent an enormous investment on behalf of the homeowner. With so much money on the line, it’s important that high-value home owners have adequate luxury home insurance. Part of getting the right luxury home insurance policy for your needs is understanding the difference between replacement cost and actual cash value. Depending on the policy you select, your coverage will be determined by these factors. So what’s the difference between these coverage types, and which is right for you?

Replacement Cost

The replacement cost of your home is exactly as it sounds. This is the amount of funds required to replace a home that is significantly damaged or completely destroyed with a similar home in the current real estate market. Depending on your luxury home insurance policy, this may also cover the cost of replacing your personal property. Be sure to ask your agent about this when requesting a quote.

Actual Cash Value

This type of coverage is determined by the replacement cost of your home (not including land value) at purchase less depreciation over the period of time you have owned the home. While the initial replacement cost of your home may be clear, insurers often have different methods to calculate depreciation. When requesting a quote for a luxury home insurance policy with cash-value coverage, be sure you understand how depreciation is determined.

Which Luxury Home Insurance Coverage is Right for You?

As policies with replacement cost coverage provide protection for a value that is closer to the policy owner’s living situation before a claim, these are the most common policies on the market. Because depreciation is figured into cash-value policies, premiums tend to be lower, but buyers should beware that payout on claims may also be significantly lower than with a replacement cost policy. For this reason, we strongly recommend policies with replacement cost coverage.

Request a Luxury Home Insurance Quote

King Street Agency has provided high quality luxury home insurance policies to Charleston, South Carolina residents for over a decade. With an extensive network, deep local expertise and personalized service, we will find the best luxury home insurance policy for your needs. If you have questions about whether replacement cost or cash-value coverage is right for you, our agents will be happy to discuss your options in greater detail.

Request a luxury home insurance quote from King Street Agency today.