What is the difference between Replacement Cost and Actual Cash Value coverage?
This important fact is often overlooked on condominium owner policies. A policy with replacement cost coverage will pay what it costs to replace a covered item in your condo. Actual cash value coverage will cover what that same covered item is worth today. Here is a simple example. There is a fire in your condo. In that fire, your couch is completely destroyed. Under a condominium owner’s policy with actual cash value coverage, that couch will be paid for what it’s worth today. Well, your couch is several years old, let’s say it’s worth $100. Now to go out and buy a new couch will cost $1000 in our example. If the insurance company were to pay you $1000 to replace your burned down couch with a similar couch, you have replacement cost coverage. Get replacement cost coverage if you can. The primary reason for you to have condo insurance is to put you back where you were before the claim.
