The Different Types of Property Insurance Coverage

Property insurance is a straight forward concept, however it can vary in how it is applied. This post looks at three types of insurance coverage and how they are different.

There are the three types of insurance coverage. Replacement, actual cash value and Extended replacement cost.

Replacement cost coverage will cover the costs of repairing or replacing a property, regardless of depreciation or appreciation. It also insures that the same quality of repair or replacement is issued. The premiums for this type of cover are based on replacement cost values, not actual cash values.

Actual cash value insurance provides cover for replacement and repair costs, minus any depreciation.

Extended replacement cost insurance will pay over the coverage limit if the costs for construction have increased. This generally will not exceed 25% of the limit. When you obtain an insurance policy, the coverage limit established is the maximum amount the insurance company will pay out in case of loss of property.