When comparing your homeowner’s insurance quotes in Connecticut, be sure to compare policy terms and conditions with like terms and conditions. If you find a major disparity in insurance quotes, it might be a result of different property valuation clauses.
With homeowner’s policies, insurance companies normally use one of two types of valuation when determining the amount they will pay at the time of a loss. Check your policy to see which of the valuations is used because it will make a difference in your insurance premiums and your claim reimbursement check. The valuations are as follows:
Actual Cash Value (ACV): With this type of valuation, the insurance company will take the current replacement cost of your home and deduct your home’s depreciation value. If you’re living in an older home, the depreciated value of your home may differ greatly from the current market value.
Replacement Cost: With replacement cost, the insurance company will reimburse the amount it costs to rebuild or replace your home using materials of the same kind and/or quality to that used in the house prior to the loss. Depending on the age of the home, certain materials may no longer be available, so the insurance company will pay for comparable building materials. Because they do not deduct for depreciation, you will fare better than if the actual cash value was used.
Replacement cost valuation will cost more in annual policy premiums, but it is well worth the additional cost to be made whole again in the event of a loss. Your home is a major investment; do not scrimp on its protection.
When shopping around for your homeowner’s insurance, be sure to place the policies side by side and analyze the various terms and clauses. A simple difference in valuation can make a huge difference in the value and cost of your insurance policy.