Before purchasing manufactured home insurance, it is important to understand the difference between “replacement cost” and “actual cash value.”
Replacement cost is the amount it would take to replace, rebuild or repair damages with materials of similar kind and quality, without deducting for depreciation up to your policy limits.
Actual cash value is the value of your property when it is damaged or destroyed.
Most manufactured home policies are written on an actual cash value basis, meaning the depreciation of your manufactured home and its contents is taken into consideration at the time of a loss. This is usually figured by taking the replacement cost and subtracting depreciation.
For example, a chair costing $500 to replace may have a reasonable “life” of 20 years. If it is destroyed after 10 years, its actual cash value will be much less than $500, probably about $250. The condition of your chair would also affect your insurance payment.
There are a few insurance companies currently writing replacement cost policies on manufactured homes and their contents. You need to check with your agent to see if this coverage is available.