If you are still looking for a homeowner insurance policy, find home insurance that provides replacement-cost coverage for both your house and its contents. If you already have a policy, check it and make sure it uses the replacement-cost method when calculating the amount of claims after your house and its contents are damaged or destroyed.
Most standard home insurance policies use the actual-cash value method when calculating amounts of claims for the contents of the house. However, insurance companies offer the replacement-cost value for both the structure and the contents to clients who prefer it.
In a home insurance policy that uses the actual cash value method for house contents, the insurance firm will incorporate depreciation in the computation. The resulting computation would be less than when depreciation is not factored into the computation.
According to Don Griffin, a top executive of the Property Casualty Insurers Association of America, the annual premiums of policies with replacement-cost coverage are about ten percent higher than premiums for policies with actual-cash value coverage.
For renters, the annual premiums for replacement-cost coverage are about 20 percent higher than premiums for actual cash-value coverage because renters’ insurance policies cover the contents of the rental house and not the structure.
Griffin added that buying the actual-cash value coverage is cheaper but homeowners, especially renters, should consider the bigger losses they suffer especially for valuable contents when destruction happens.
As you are comparing home insurance policies, find home insurance that offers replacement-cost coverage for all parts and systems of the house. There are policies that exclude the roofing materials from the replacement-cost provision. Because roofs are vulnerable to damages during winter storms, insurance firms want to reduce their liabilities for roofs, especially old roofing materials.
Other policies do not apply the replacement-cost method to valuable objects such as records, art, memorabilia and other collector’s items. Talk with your insurance agent about the cost of special riders that provide special coverage to items such as these if they cannot be covered in the standard homeowner insurance policy.
To ensure the coverage of all your valuables, make a thorough and written inventory of your personal belongings. Include detailed descriptions, models, prices, dates of purchase, location and copies of receipts.
All in all, what is most important is to find home insurance that covers the structure of your house and all your personal belongings on a replacement-cost value basis and which is issued by a reputable insurance company.
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