Contents Insurance – You Have a Choice

Do you have Replacement Value or Fair Market Value coverage on the contents of your house or apartment?


The amount of coverage for your personal property is determined by a percentage of the value of your homeowners policy. This percentage amount can be anywhere from 40% to 75%. Insurance companies and policies differ, so you will want to review your policy to ensure you have sufficient coverage and the type of coverage you want.


There are two types of personal property insurance; they result in a very different outcome for recovery after an insured loss.


Replacement cost

When you have replacement cost coverage, you will normally receive the funds to replace each item after a loss. This is the cost of the new “like” items that need to be purchased as a replacement. This is typically a two-step process. You first receive the cash value of the item, then after purchased and a receipt is submitted, the insurance company will send you the additional funds for full replacement.


Actual cash value

With cash value coverage, your insurance settlement will be based on fair market value. This is determined by taking the replacement cost less depreciation. This can result in pennies on the dollar. Another way to figure fair market value is to determine “garage sale pricing.”


Don’t be surprised after the fact. Talk to your insurance agent to determine if you have replacement or cash value insurance. Also, make sure that the insurance amount on your contents, based on the value of your home, is sufficient. How do you know the value of your belongings? A home inventory!


This is just the foundation of your contents insurance. There are many variables depending on the type of contents you own. We’ll cover these in future issues, but if you have any questions about your policy, call your agent to discuss the types of contents you have and what might need additional coverages.