What Are the Different Levels of Homeowners Insurance?

You Ask, We Answer: What Are the Different Levels of Homeowners Insurance?

When it comes to homeowners insurance, not all coverage is created equal. In fact, there are different levels of coverage, and while policies should always be analyzed for their specific details, it may help if you decide which level of coverage makes the most sense for you as you’re scoping out such policies. Here are three common levels of homeowners insurance you can expect to see when you begin your search.

ACV, or Actual Cash Value

ACV–or Actual Cash Value–insurance is pretty straightforward. This level of homeowners insurance covers the cost of the house and the current value of your belongings. That means that if you have items that have depreciated in value, the insurance policy will cover only up to the depreciated value. Keep in mind that most things depreciate in value over time, from furniture to electronics to appliances–so the current value of your belongings may be lower than you’re expecting. However, it is possible with some homeowners insurance policies to have a “recoverable depreciation clause,” which would allow you to claim the actual cash value along with the depreciation amount. Be sure to inquire with your insurance agency as to what you can expect from an ACV homeowners insurance policy, and what the pros and cons are for this type of coverage.

Replacement Cost Value

Replacement Cost Value refers to a level of homeowners insurance that covers the actual cost value of your home and possessions without losing the depreciation value. This means that the policy would help you rebuild or repair your home and replace your possessions at an amount up to the original value that you paid.

Guaranteed Replacement Cost Value

Sometimes referred to as Extended Replacement Cost Value, this level of homeowners insurance is considered a cushion against inflation and can be the most comprehensive coverage level. In essence, this policy pays the amount it costs to repair or rebuild your home, even if that cost extends beyond your policy limit. Of course, you’ll need to discuss the details with your insurance broker because there will be a ceiling to this amount of coverage–but typically, it will cover 20%-25% above the cost of your policy limit.

One of the major benefits of Guaranteed Replacement Value coverage is that it doesn’t solely cover the value of your home, but it also allows you to rebuild it at today’s prices. If you’ve lived in your house for a few years or a few decades, chances are, the cost of repairing it has increased due to the cost of goods and labor, so this policy may, in the long run, give you the most peace of mind.

Not sure where to begin in the search for your homeowners insurance policy? Reach out to your local Calcagni Real Estate agent for recommendations on insurance brokers local to your area. With over 50 years of local real estate experience, our agents have many vendors they work with and recommend, and this can make your search for the right homeowners insurance policy that much easier!


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