Why You Need Replacement Cost Insurance

Replacement Cost Insurance Agency in CT

When purchasing homeowners insurance, many buyers wish to carry extra insurance which you will often get offered is called replacement cost insurance. Replacement cost insurance is often sold as part of homeowners insurance. Almost half of all homeowners did not understand the true value of what replacement cost insurance would cover if they ever had to make a claim. In your insurance, you will see that there is a price listed as a DEC page. This is the maximum amount you can get paid for that claim (but you may get paid less). That does not mean that the amount of money you get will cover the actual replacement cost of the damage.

How Much Will I Get Paid for My Claim?

The actual amount of money you will get for your claim will depend on several factors, including the following:

  • Your Description of the Incident: The description you provide of the incident will play a factor in the amount of money you get back for your claim. You will need to describe how the incident came about, what damage gets done to your property. This description will determine how you get some of the value of your property back.
  • The Extent of the Damage: The extent of the damage will play somewhat of a role in the money that you are eligible to get back from your insurance as well. If your property didn’t get destroyed you might get less money than back than you would if it was a total loss.
  • Damage Repair vs. Cost to Replace: The insurance company looks at the cost to replace the item and the cost to repair the damage to the existing item. If the cost to repair is cheaper than the replacement costs, they may repair the item rather than giving you cash for a replacement.


Both these factors and honestly reporting and documenting the damage done to the property will be a large part of determining how much cash you can get back from the replacement cost insurance when you make a claim.

What Else Goes Into Determining How Much Money I Get Back on My Insurance Claim?

Other factors will go into determining how much you get paid by your replacement claim insurance on the property that was damaged or destroyed. Most insurance companies will take a certain amount off of the cost of the product that you initially purchased.

For example, if you purchased a $5,000 grand piano in 2000 and are filing a claim on it in 2019, the use and depreciation of that product may mean that the piano is only worth $2,500 today. So you paid up to $2,500 for that piano and not the $5,000 you brought it for almost 20 years ago.

If Your Property Itself Was Damaged:

The replacement cost insurance might also decide that it’s cheaper to rebuild a piece of property rather than replacing it. Replacing homes, sheds, or other structures on the property is often more expensive than just repairing what it left. Generally, it won’t matter if the homeowner wishes to rebuild rather than repair the property. Whatever is less cost to the insurance company will likely be the route they choose to take, whether the homeowner wishes to take that route or not.


In the end, it’s important to understand that the DEC is not the amount of money that the insurance company will pay for a certain lost or damaged item on a claim. That is the maximum they pay anyone. You may not get the full cost of every single item that was damaged back. Therefore, you should have replacement cost insurance to help you cover and offset some of your losses in case your property is ever damaged or destroyed. Having this insurance can help offset some of the costs that your homeowners’ insurance doesn’t cover.

For further assistance with purchasing a replacement insurance plan that works for your personal needs, please feel free to contact us at 203-723-8500. We, at the Branco Insurance Group, are here for you and always happy to help.

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