Your homeowners insurance should have what is known as “replacement coverage.” Basically, this allows you to receive the cost of replacing a lost item without any depreciation. In other words if you suffer a loss your insurance will pay what it costs to replace the property at today’s prices.

Although different insurers offer homeowners different amounts of replacement coverage, these policies give you more protection than actual cash value coverage. For example if you had a home theater system that was two years old and a burglar broke into your home and stole it replacement cost insurance will pay to replace your system with a similar one from today minus your deductible. However, cash value policies would only give you what the two-year-old system is worth. You’d have to make up the difference yourself to buy the new system.

Replacement coverage is often more expensive because it provides much better coverage. However, it is generally the type of insurance that is in standard homeowners’ insurance policies. Still, you should also be clear that this is the type that your policy includes rather than cash value coverage. Make sure to ask your insurance agent about this and any other questions you have about your homeowners’ insurance policy.

This entry was posted on Thursday, June 12th, 2008 at 9:41 pm and is filed under Home Insurance. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.