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Do I need to insure my home for replacement cost?
I am about to purchase homeowners insurance, and I’m confused on replacement cost versus actual cash value. Do I need to insure my home for replacement cost?
Nick Kunze · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Good question! Whether you insure your home for replacement cost is completely up to you.
When starting a
home insurance policy
, you usually choose one of two options: you either insure your home for replacement cost or actual cash value.Actual cash value is the amount your home or possessions are worth with depreciation factored in. That means you may get paid out less than it’ll cost to fix your home (or replace your possessions).
Replacement cost pays you the amount you need to replace or repair the damages or losses, meaning larger payouts after a claim.
Replacement cost insurance is usually more expensive, so you need to weigh higher upfront costs against better coverage after an accident.
Additionally, if you have a mortgage, you’ll want to check with your lender. Some lenders have specific requirements for home insurance. Your lender could require that you purchase a policy with replacement cost to ensure your home has coverage if something should happen.
If you want help finding the ideal homeowners insurance policy, you should download
Jerry
. Jerry is the easiest and most effective way to find a home or renters insurance policy that is customized for you. You can even bundle your policy with your car insurance for the most savings. After providing you with a comprehensive cross-analysis of the best policies across providers, Jerry will handle the phone calls, paperwork, and renewals for your top pick so that you don’t have to.
View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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