Do you want the destroyed items to be replaced by new items or would you prefer to receive compensation based on their actual cash value? There too, you have some choices to discuss with your insurance agent or broker before purchasing your home insurance policy.

Examples of compensation

Example of a settlement based on replacement cost

Amount paid for a refrigerator purchased 10 years ago $800
Current price of a refrigerator with the same features  $1,000
Compensation   $1,000


Example of compensation based on actual cash value

Amount paid for a refrigerator purchased 10 years ago $800
Current price of a refrigerator with the same features $1,000
Depreciation ($40 a year for 10 years) $400
Compensation ($1,000 - $400) $600

For personal property

Following a loss, under your home insurance policy, your insurer will indemnify you for the items that were damaged based on their cash value when they were damaged, i.e., taking wear and tear and depreciation into account.

However, when you purchase your insurance policy, you can ask to be indemnified based on “replacement cost”. This means the items will be replaced without taking depreciation into account. If you decide not to replace the damaged or stolen items, you will be indemnified for the items based on their actual cash value. 

No matter your choice, before replacing a damaged item, if it can be, your insurer will have it repaired.

For the building

How important is it to accurately evaluate the cost of rebuilding your home?

The amount of money your insurer allocates to rebuild your home cannot exceed the amount chosen under your policy. That’s why it’s important to accurately evaluate the cost of rebuilding your home when you purchase your home insurance coverage.

For a building, your insurer will have the damaged portions repaired or rebuilt. If you opt not to have your home repaired or rebuilt, your insurer will reimburse you an amount of money based on its actual cash value.

For the building in co-ownership

Damage to the “building” portion of your private portion is covered under the insurance policy of the condominium’s corporation, which will have the building restored to the same state as it was at the time of construction. 

The damaged portions will be repaired as per their replacement cost, according to the plans of the original condominium construction. 

If improvements were made since the construction, by you or by previous co-owners, it’s your insurance policy that pays the difference (known as added value), if the replacement cost is higher.


Home tips

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