Homeowners is one of the most popular forms of personal insurance available and a typical policy will have two sections. The first section covers your property. The second section provides personal liability coverage (should someone get hurt on your property and file a lawsuit against you). If you own or lease property, you should have this type of insurance. Most lenders require homeowners insurance to obtain a mortgage.

What is the difference between "actual cash value" and "replacement cost"?

Under a homeowners policy, covered losses can be paid on either an actual cash value basis or on a replacement cost value. Under an actual cash value basis, you are entitled to the depreciated value of the damaged property. In other words, the older the property is, the less money you will receive for it. When replacement cost is used, the policyowner is reimbursed the amount it will cost to replace the property at current prices using similar products and quality.

More on this product