There are two distinct ways to insure your personal
possessions:
Replacement cost coverage:
This coverage pays you the dollar amount needed to
replace personal property without any deduction for depreciation, but is
limited to a maximum dollar amount.
Actual cash value:
This coverage pays you an amount equal to the
replacement value of damaged property minus depreciation. Unless a homeowners
policy specifies that property is covered for its replacement value, the
coverage is for actual cash value.
Another point to keep in mind is that many people
make the mistake of underestimating the value of their home contents. This
mistake is easily made when you consider the amount of new items we purchase
each year. Under-insurance can lead to heartache and inconvenience should the
unexpected happen.
Conclusion: Make sure that you know what type of personal
property coverage you have, and that you have enough coverage, BEFORE you have
a claim. The difference could be substantial. Check your policy today.
