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Replacement cost coverage for personal property
Replace your belongings at their full value — not their current Craigslist value.
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Choosing replacement cost coverage for your personal property on a home insurance policy means that you’re protected for its full value when you first bought them, and your insurer will pay to repair or replace your things after a covered incident.
What is personal property replacement cost coverage?
Personal property replacement cost coverage is an add-on that pays for damaged or stolen belongings for qualifying reasons without factoring in depreciation. Your home insurance policy will cover the cost of new similar items as replacements, regardless of how well-used the original item.
Without this coverage, you’ll receive a payout for the item at the value considering its age and condition. The payout may or may not cover the full cost of buying a new item.
Does it protect my belongings away from home?
It depends on the insurance policy. However, most policies do cover personal belongings away from home. Examples include if you’re traveling or keeping your belongings in a storage unit. If the policy allows off-premises coverage, replacement cost protection for those belongings should apply.
How does replacement cost coverage work on home insurance?
When insuring your home, replacement cost coverage works the same as mentioned above. It helps you rebuild your home at today’s market value for materials. You may also see options for guaranteed replacement cost or extended replacement cost coverage. Guaranteed replacement cost makes sure you can replace your home even if materials and labor cost more than your policy limits.
Extended replacement cost gives you a specific amount of extra dwelling coverage, such as 25% or 50% more. So if you buy $250,000 in home coverage but rebuilding costs $300,000 or 20% more, your insurance will still cover the full amount.
What’s covered by personal property replacement cost coverage?
A home insurance policy that includes replacement cost for personal property covers:
- A new equivalent item to replace an old item that has been lost, stolen or damaged
- An equivalent replacement if the lost, stolen or damaged item is no longer available
- Replacement of an item regardless of its age
However, it may not cover:
- An upgrade to a top-of-the line replacement
- Certain items nearing the end of their lifespan, like a roof that already shows wear and tear or appliances over 15 years old
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Personal property replacement cost vs actual cash value
While comprehensive policies will often include replacement cost coverage for your personal property, some policies will offer actual cash value instead.
| Replacement cost | Actual cash value |
|---|---|
| Reimburses you for the cost of a new similar item | Reimburses you for what your used item would be worth if you sold it |
| Does not take wear and tear into account | Takes wear and tear into account |
| More expensive premiums | Cheaper premiums |
Why should I insure my belongings at their replacement cost?
The biggest advantage of replacement cost coverage for your personal property is that it protects you against depreciation.
For example, while your 60-inch HD TV might have been worth $3,000 when you bought it five years ago, its current market value, or what you’d be able to sell it for, will be a whole lot less. While a policy that covers actual cash value will only reimburse you for the market value, a policy that covers replacement cost will reimburse you for a brand-new 60-inch HD TV.
Does scheduled personal property cover replacement cost?
In a way, yes. Scheduled personal property coverage protects your valuables at their last appraised value. If your valuables get lost or damaged, you have to show documentation from the appraisal to receive your payout.
However, if the last value appraised is less than the current market value, you may not receive the full amount for that item. You can avoid this problem by re-appraising your items regularly, such as every five years.
Also, your coverage won’t go above the policy’s limit. So a $2,000 limit on scheduled property coverage mean you’d receive $2,000 total, even if the item is currently worth $3,000. When you get your items appraised, you can check your coverage limits to make sure you have enough insurance.
What should I watch out for?
You’ll pay more to cover your belongings for their replacement cost than you would to cover them for their actual cash value.
You should also be aware that replacement cost coverage generally won’t be enough to cover expensive items like jewelry and art. For those, you’ll want to get scheduled insurance, also known as valuable personal property insurance.
Bottom line
Insuring your personal property for its replacement cost means you’re fully protected if damage or theft happens. Compare home insurers to find a comprehensive policy that fits your budget.
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