Replacement cost insurance is a type of homeowners insurance policy that helps pay to replace or repair damaged property without factoring in depreciation. It is different from actual cash value insurance, which determines value by taking the cost to replace your personal belongings and reducing that amount due to depreciation from factors such as age or wear and tear. Replacement cost insurance is generally more expensive than actual cash value insurance, but it offers more financial protection.

Key features of replacement cost insurance include:

• Dwelling coverage: Most homeowners insurance policies come with replacement cost coverage for the structure of your home. Dwelling coverage typically helps pay to repair or rebuild your home using materials of a similar quality.

• Personal property coverage: If you have replacement cost coverage for your personal property, your insurance will typically help cover the cost of buying a new item at todays price. For example, if your TV is stolen, replacement cost coverage will likely reimburse you enough to purchase a new one of similar model and quality.

• Guaranteed replacement cost: This coverage pays for the full cost of rebuilding your home back to its exact previous condition, no matter what.

It is important to note that replacement cost insurance policies have coverage limits and deductibles that will apply. Homeowners looking for maximum coverage may decide to purchase guaranteed replacement cost coverage as an add-on to ensure they can rebuild or repair their home to its original condition.