The HO-B and HO-C policies provide replacement cost coverage for your house, up to your policy’s dollar limits. Replacement cost is what you would pay to rebuild or repair your home, based on current construction costs. Replacement cost is different from market value and does not include the value of your land. If you are not sure of the amount it would cost to rebuild your home, your company or agent usually has construction cost tables to help you determine the cost.

To receive full payment (minus your deductible) for a partial loss, such as a hail-damaged roof, you must insure your house for at least 80 percent of its replacement cost. If you insure your house for less than 80 percent of the full replacement cost, the insurance company will only pay a portion of the loss.

Unless you buy an endorsement to increase your coverage, HO-A policies only provide actual cash value coverage. Actual cash value is the replacement cost of your property minus depreciation. If your home is destroyed and you only have actual cash value coverage, you may not be able to completely rebuild.

If you have an HO-A amended policy or an approved alternative policy, read your policy carefully to know whether it offers replacement cost coverage or actual cash value coverage

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Coverage for Your Personal Property  
HO-B policies automatically cover household contents – furniture, clothes, appliances, etc. – up to 60 percent of the amount of your dwelling coverage. This means if your house is insured for $100,000, its contents are insured for up to $60,000. You can get more coverage by paying a higher premium.

Personal property coverage pays only the actual cash value of damaged, stolen, or destroyed household goods unless you buy replacement cost coverage. Actual cash value is an item’s replacement cost, minus depreciation.

Replacement cost coverage offers you more protection than actual cash value coverage. For example, if a burglar steals your six-year-old television set, and you only have actual cash value coverage, you get only what you would expect to pay for a six-year-old television set. With replacement cost coverage, the insurance company pays to replace your TV with a new set similar to the stolen one.

Companies generally want you to prove that you replaced an item before they’ll pay your claim in full. However, if you have an HO-B policy, the company must advance you the first $1,500, plus the depreciated value of any other damaged property, without requiring proof of replacement. After that, the company must pay you within five business days after receiving proof you replaced, restored, or repaired the property. A company can offer to replace the items instead of paying cash, but the choice is yours.