When securing homeowners insurance, you may notice that an actual cash value policy is notably less expensive than replacement cost coverage, which is usually the default protection. That is because an actual cash value (ACV) policy will take into consideration the depreciation of the structure or contents for which coverage is being sought.
The replacement value is not a guarantee of 100% of the cost of a new item, however. If your television is an 11-year-old HD flat screen and it’s ruined in a covered loss, you will receive coverage for an 11-year-old HD flat screen—not a brand new smart TV. The same goes for your other belongings, like appliances and furniture, as well as finishes, such as cabinets and flooring. Replacement cost coverage doesn’t apply to fine art, real Oriental rugs or other high-end items. For those, talk to your agent about a personal articles addition to your policy.