Why You Should Know If You Have Replacement Cost

You should know if you have replacement cost coverage, because not knowing could easily mean the difference in thousands, tens of thousands, or even hundreds of thousands of dollars in payout to you at claims time.

The term gets used a lot (both in and outside the industry).

So let’s take a quick look at what it really means

Replacement Cost (Definition)

Replacement cost means the company is on the hook to pay you for (a covered loss) at the cost to replace the property in today’s value WITHOUT depreciating (reducing) for the age and condition of the property. When they depreciate it’s called (ACV) actual cash value coverage.

Think about that payout difference for a second… that has HUGE implications in how much you get paid.

If your home and personal belongings inside are damaged and the adjuster comes out to make payment and writes you a check for the bricks & wood that are 20+ years old, the couch, carpet, tv’s, clothes, appliances, computers, that are all 5+ years old, would you want that check to reduce for the age/condition of those items, or a check that it would cost to REPLACE those items with new items at today’s value?

If your answer is “a check to REPLACE in today’s value”, then you NEED replacement cost.

What You Should Look For

You need to be sure to look for replacement cost on the structure (the building), AND THE CONTENTS.  

Many policies may only give you replacement cost on the building, but they may also be able to give replacement cost coverage on contents if you ask.

Understanding insurance is not as complex as it may seem.  But, the absolute worst thing you can do as a consumer, is to sit back and assume things are in place on your current policy.  The difference in payout to you, reaches catastrophic levels very quickly if you get it wrong.

This is just one of the many items we look for when we review our clients policy’s.

If you would like an expert review of your current policy at no cost, no obligation.  You can email me directly, steve@stevewhiteinsurance.com or contact us online!