Be Aware of This Homeowners Insurance “Gotcha.”
Your personal property ranges from the strictly practical (e.g., your lawn mower) to perhaps a few luxuries, such as a leather couch. You generally want, need, and maybe even love your stuff. If anything were to damage or destroy your belongings, you’d want the quality of the replacements to be just as good as that of the originals. After all, that’s why you have insurance, right?
Not So Fast
There's a big “gotcha” provision in most home, condo, and renters policies. Standard policies pay claims for loss to personal property (e.g., your furniture) on an “actual cash value” basis. When you file a claim, your damaged or destroyed property is compared against a “schedule of depreciation” to determine its value at the time of the loss. This applies even if your property is in excellent condition, with many more years of functional life. Your claim settlement amount will be the depreciated value of your damaged/destroyed property minus the policy deductible. That’s not likely what you envisioned.
If you were to lose your home and all your belongings in a house fire, you’d have a hard time replacing all that you’ve lost with this standard claim settlement provision.
What to Do Now
Investigate a “Replacement Cost on Contents” endorsement for your home, condo, or renter’s policy. This endorsement changes the claim settlement basis to the amount it would take to replace your damaged/destroyed property with new items of the same type and quality. While the policy deductible still applies, you would be in a much better position to quickly get your life back on track.
Call us to work with an Electric Insurance Risk Coach to help ensure you have the coverage you need. Our Risk Coaches are licensed insurance professionals who are glad to help you navigate the often-perplexing world of insurance coverage. Call us at 800.227.8211, Monday through Friday, from 8:00 a.m. to 8:00 p.m. ET. You can also visit the RiskCoachTool.com for a personalized insurance risk assessment.