MA Home Insurance: Actual Cash Value vs. Replacement Cost

Does your Massachusetts homeowner policy have the Personal Property Replacement Cost Endorsement?

Claims can be settled two different ways: Actual Cash Value basis  (ACV) or Replacement Cost basis.

ACV is based on the replacement cost of the property, minus a deduction for physical depreciation and obsolescence. Your 10 year old recliner might not be worth much when figured this way and the payment from the insurance company might not be enough to buy a new one.

However, if you have the Replacement Cost Endorsement (cost is about 10% of the policy’s premium), the company will pay the cost to replace the property with a similar type and quality of property without a deduction for depreciation.

Having this replacement cost endorsement can be very valuable. However, even policies with Replacement Cost have limits for “special items” such as jewelry, antiques, collectibles, fine arts, and silverware. These items should be “scheduled” on your policy separately.