Property is valued in two main ways. If you are covered for the actual cost of replacing your property, this is known as a replacement-cost basis. The alternative, actual cash value (ACV) reimbursement, is based on the replacement cost minus physical depreciation of the lost or damaged property.

The premiums for ACV policies tend to be lower, as they usually pay out less, but the reimbursement could be inadequate if you actually need to replace items. Therefore, most brokers will tell you that you are better off with replacement-cost insurance, unless your industry's used equipment is easily obtained at its physically depreciated value.