What's the difference between replacement cost and actual cash value coverage?

Replacement cost pays what it takes to buy a new equivalent item today, while actual cash value pays the depreciated value — what your old item was actually worth after wear and age. If a five-year-old TV is stolen, replacement cost coverage buys a comparable new TV, but actual cash value might pay only a fraction of the original price after depreciation. The same applies to your roof or your belongings on a homeowners or renters policy. Replacement cost coverage costs a bit more in premium but pays far more when you file a claim, which is exactly when it matters. For the dwelling and contents on a home policy, replacement cost is almost always worth choosing. Check your declarations page to confirm which valuation method your policy uses — many people don't realize they're on actual cash value until claim time.