Do I Need Replacement Cost Coverage On My Home?

When you purchased your home, you bought insurance to protect it.  Your Homeowners insurance is there to rebuild your property if you were to suffer a fire, severe weather, or many other losses.

However some people make the mistake of buying the cheapest insurance, thinking that it’s just like every other Homeowners policy.  That’s not true!

When you look at the details of your home policy, you’ll see that you are either covered for “replacement cost” or for “actual cash value.”  These are important differences.

Replacement cost means that the insurance company will pay whatever the cost is to get your home back to the state it was in before the claim.  It’s why your home is usually insured for a lot more than you actually paid for it.  Building costs and materials are always increasing and it may cost much more to re-build your home, then it originally did.

Actual cash value on the other hand, only pays what your home was worth at the time of the loss minus any depreciation.

Ask your insurance agent for replacement cost on contents as well. Your contents are the items in your home such as furniture, electronics, etc. Most homeowners insurance policies that insure your home at replacement cost are only insuring your contents at actual cash value.  You can ask your insurance agent for a quote on insuring your contents at replacement cost. You may be surprised at how affordable it could be.

Here’s an example.  Let’s say that your couch was burned in a covered fire claim. If you have replacement cost on your contents, your insurance would buy you a new couch in the same style and value as the original was when you bought it.  You get a brand new identical couch.

Actual cash value would only pay what your couch was worth at the time of the fire.  The “market value” of your couch is more likely what you could have sold it for on Craigslist!  You’re not going to get a new couch from the claim, but you could go buy a used one similar to the condition of yours right now.
Does that make sense?  Now imagine what a difference that makes if you were to suffer a major loss!

We believe that replacement cost on your home and contents is the best way to go. Give us a call today for a quote on adding replacement cost on content to your existing policy. Or if you need a quote for a new policy tell us you want a quote with replacement cost on contents. Always check to see what kind of coverage you’re purchasing.