Type Actual cash value and replacement cost are the two types of coverage available to renters.
Actual cash value coverage pays out what the property was worth when it was damaged or lost, so it reduces the amount of money paid out in a claim because of wear and tear or age.
Since this means you might not get enough money to buy a new item, renters insurance with actual cash value is the cheapest option.
Replacement cost is approximately 10% more expensive than actual cash value coverage and covers the entire cost of replacing the items or property.
It is preferable to select replacement cost coverage unless your finances are extremely limited.
It guarantees that you will receive sufficient funds to purchase a new couch in the event that it is destroyed by fire.
Because the coverage pays you based on what your previous sofa was worth due to depreciation, you might get paid much less if you have actual cash value coverage.
However, this may not be enough to cover the cost of a new sofa.
