The Basics of Personal Property Coverage

The personal property insurance section of homeowners and renters policies has two very distinct coverage gaps that every policyholder should understand and address to make certain their property is covered sufficiently:

  • Valuation: Your insurance policy has a valuation clause regarding how it determines the value of your personal property at the time of a loss, and there are two methods for doing this. You decide which method should be used when the quote is calculated and the application completed. One method is actual cash value, which is calculated by using the purchase price minus depreciation. The other, and more popular, method is calculated by establishing replacement cost, or the cost to get the item new, and using that amount of reimbursement. With both methods, the deductible you select on the application is subtracted from claim payments.
  • Sub-limits: Homeowners insurance companies have determined that some categories of personal property are much riskier than others, and as a result, they have established sub-limits for payment in those cases:

Most homeowners and renters policies allow policyholders to increase the limits on some or all of these categories with endorsements and additional premiums. Policyholders may also elect to “schedule” any items whose value exceeds the sub- limits assigned to their category. This is also done with endorsements and paying additional premiums.

For all of these reasons, it’s important for you to talk to your independent insurance agent about the right contents insurance endorsements for your homeowners policy. Finding that you have coverage gaps after a claim can be financially devastating. You can prevent this from happening by asking questions during the quote and application process.

Deciding Between Actual Cash Value and Replacement Value

The decision on whether to base your personal property coverage on replacement cost or actual cash value is always made at the time of application.

If you prefer to have claims resolved in a way that allows you to replace your contents on a new-for-old basis, then replacement cost should be your choice.
If you only expect the cash value at the time of a loss (depreciated value), then you should choose actual cash value coverage and save a little money on your insurance premium.

The decision on whether to base your personal property coverage on replacement cost or actual cash value is always made at the time of application. If you prefer to have claims resolved in a way that allows you to replace your contents on a new-for-old basis, then replacement cost should be your choice. If you are not as concerned about your contents, and only expect the cash value for them at the time of a loss (depreciated value), then you should choose actual cash value coverage and save a little money on your insurance premium.

The decision on whether to base your personal property coverage on replacement cost or actual cash value is always made at the time of application. If you prefer to have claims resolved in a way that allows you to replace your contents on a new-for-old basis, then replacement cost should be your choice. If you are not as concerned about your contents, and only expect the cash value for them at the time of a loss (depreciated value), then you should choose actual cash value coverage and save a little money on your insurance premium.

Working with Your Agent to Get the Right Coverage for Your Valuables

Now that you have an understanding of the different methods for obtaining contents insurance, it is time reach out to your Imperium Insurance agent and discuss your property.

Imperium Insurance agents have access to multiple insurance companies and policy types and can compare quotes to find a policy that will fit your needs and budget. They are prepared to take the time to help you assess how much coverage you need for your personal property. Contact your local agent today.

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