A homeowners insurance policy provides peace of mind for homeowners. They know that their property and belongings are covered if disaster strikes. Yet, not all policies provide the maximum amount of protection that you might need, especially for your valuable personal property. Most standard policies only pay a percentage of what it would cost to replace the very things you rely on every day. That’s why homeowners should consider replacement cost coverage. With this in your policy, you won’t have to worry about draining your fund to replace your much-needed and much-loved items when a major loss occurs.


Home Insurance Replacement Cost


What is home insurance replacement cost coverage?

When you file a home insurance claim for a covered loss, the insurer will pay the settlement by applying actual cash value or replacement cost value to losses. Most standard home insurance policies provide replacement cost coverage for the home’s structure but actual cash value coverage for possessions.


Actual cash value is coverage that pays a depreciated value of your belongings. For example, say you bought a new couch for $1,000 three years ago and it’s been destroyed in a recent fire. When filing a claim, the insurer will pay you the depreciated value of the couch. That means if the insurance agency determines that the couch has depreciated by 50 percent, you’ll receive a settlement payment of $500, minus your deductible.


Replacement cost coverage, on the other hand, pays the amount you’ll need to replace your property at current market prices. That means you’ll receive a full payment of your couch, minus your deductible.


Who needs replacement cost coverage?

There are plenty of benefits of securing this coverage, but you may be wondering if you need it. Homeowners should know that even minor disasters, from falling trees to leaks, can cause a few thousand dollars in damages. Major catastrophes, such as your home burning down, will need tens of thousands of dollars to replace your belongings, appliances, clothing, furnishings, and more. The limited amount of coverage provided by an actual cash value policy would not be sufficient enough to cover all associated expenses.


Many homeowners recognize this and choose to increase their coverage limits or add riders for more protection. However, a replacement cost policy would eliminate the need to buy riders for expensive but replaceable personal items, such as jewelry, musical equipment, and electronics. No longer is replacement cost coverage only for those who enjoy the finer things in life; it is for all homeowners.


Stay on top of coverage

When you purchase a homeowners insurance policy, the insurer will determine how much it’ll cost to completely rebuild your home. Any time you make a home improvement, you should let your insurer know. Home improvements that increase the value of the property will require you to purchase more coverage to adequately protect your property.


Work with the right insurance agency to find suitable homeowners insurance for your needs. Not only do you need to protect your property, but you should consider your belongings, too. With replacement cost coverage, you have peace of mind that even if disaster does strike, you can replace your beloved items with the help of a reliable policy. Whether you are reviewing your current coverage or taking out your first policy, consider this valuable addition to your insurance.


For peace of mind, be sure to protect your house with reliable coverage. Ready to get started on your tailored coverage? For help securing homeowners insurance for your property, visit the team at Tompkins Insurance Agencies. Our expert team knows what it takes to help homeowners safeguard their home and belongings.