1. Understand cash value coverage. Actual cash value coverage reimburses you for the value of your home based on its current condition. If your home was built 10 years ago, you’d receive only the depreciated value of decade-old windows, cabinets, appliances, and so on.

2. Consider replacement cost coverage. Most insurers recommend the more comprehensive replacement cost coverage. With it, you’ll be reimbursed for the amount it will cost to rebuild your home like new with the same kind and quality of materials. Depreciation doesn’t factor into the settlement equation. To get the full benefit of replacement coverage, you need to purchase enough insurance to cover the total cost to rebuild your home, excluding the value of the land.

Source: NAR