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For my homeowners personal property coverage, is actual cash value or replacement value the better choice?

The best protection for your belongings is replacement value.

When you choose replacement value for the personal property portion of your home insurance policy, you’re covered for the cost of purchasing new items to replace damaged items.   

Actual cash value coverage pays only for the depreciated value of your belongings – meaning what they were worth at the time of the loss.  So instead of getting the value of replacing your item with a similar new item, actual cash value pays a fair market value for a similar used item. For example, if you had a TV stolen that was five years old, you’d receive money to buy a five-year-old TV, not a new TV.

Since replacement value coverage will pay out more for your personal items in a claim, but you’ll pay a higher premium to have it as part of your home insurance policy.  So, if you’re going for price over protection, actual cash value coverage is cheaper -- just don’t complain when you make a claim and receive depreciated value for your items.

For more information on replacement value versus actual cash value, see our home insurance basics page.

Last updated: Aug. 5, 2014