When the age and location of the home permit, you should always choose Replacement Cost Coverage. As mobile homes age their value diminishes, much like a car. This is called depreciation. A standard mobile home policy will deduct for any depreciation in the event of a total loss. When you purchase Replacement Cost Coverage there is no deduction for depreciation. Instead, you will receive the cost of replacing your totaled home with a new home, up to the policy limits. This is sometimes referred to as “new for old”. For example: A brand new Park Model purchased for $35,000 -- and insured for the same amount-- may only be worth $20,000 five years later due to depreciation. A standard mobile home policy would only pay out the current value of the Park Model, leaving the homeowner short by $15,000 dollars. In contrast, if the homeowner had purchased Replacement Cost Coverage they could expect to receive the full $35,000 towards the purchase of a brand new home. Replacement Cost Coverage may also apply to your personal belongings.
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