When it comes to money matters, no one likes to be surprised by the feeling that they’ve been shortchanged. That’s why it’s important that you understand how your insurance policy responds to potential personal property losses.
When insuring your personal possessions on your homeowners or renters insurance policy, you have one of two coverage options: insuring for your property’s actual cash value or the cost to replace it. Find out the difference and why we recommend replacement cost coverage.
Replacement Cost Coverage
When insuring your possessions on your homeowners or rental insurance policy, opting for replacement cost coverage provides you the best reimbursement option. Why? With replacement cost coverage, you collect the full cost to replace the item, less your deductible. Here’s an example to illustrate the benefit of replacement cost coverage:
The furniture you bought a few years ago for $650 is now worth only $100, but today costs $900 to replace. With replacement cost coverage, you would collect $900 to replace the furniture, minus your deductible. With actual cash value, you would get reimbursed $100, minus your deductible. Remember, the age and type of possession impacts the depreciated amount, which can be pennies on the dollar.
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