Who decides how much my home and personal property is worth?
State laws may dictate how losses are to be figured, which means the same insurance company may use one method in one state and a different method in another. The common methods are: Actual Cash Value—The replacement cost of the item minus depreciation. For example, a new television set may cost $500. If your 7-year-old TV set gets damaged in a fire, it might have depreciated 50 percent. Therefore, you would be paid $250 for that set. Replacement Coverage—The cost of replacing an item without deducting for depreciation. So today’s cost for a TV set with features similar to the 7-year-old one damaged by fire would determine the amount of compensation. If it still costs $500 today, that would be the replacement coverage. Replacement value should not be confused with market value. The market value is what your house, for example, would actually sell for and is generally more than the replacement cost. This is because replacement value does not include the land, which almost always does no
