Tag Archives: farmbureau insurance

Replacement Cost vs Cash Value







Something to consider when purchasing insurance is whether or not you want replacement cost or cash value.

Replacement cost compensates you for the actual cost to replace your property. For example, if you have a musical instrument that was appraised by a reputable appraiser at a certain value, then if something happens to that instrument later, you will be compensated for the appraised amount.

Cash value is a little more complex.It is the replacement cost minus depreciation. So basically the only difference between replacement cost and actual cash value is the depreciation.

If your policy sates “replacement cost”, you will generally have much less cash out of pocket when it comes time for you to file a claim.