It is generally a good idea to have your homeowners insurance cover the replacement value of your home rather than the cash value.  Why?  Because a policy that pays based on the cash value of your home and property will generally not provide you with enough cash to allow you to replace whatever was damaged, while a policy that is based on replacement value will.   An upgrade from actual cash value to replacement coverage typically raises your premium 10 to 15 percent.

Replacement Cost Coverage pays to repair or replace damaged property homes without a deduction for depreciation or a dollar limit.

Cash Value Coverage pays the replacement cost minus depreciation, which quickly reduces the value of property.