Homeowner's Insurance

What Policy Do You Actually Have?

Oh man, if I had a dollar every time I hear folks aren't happy with the reimbursements from their insurance policy, I'd have a lot of dollars I don't want.  Look, I get it.  These contracts are incredibly complex with lots of big words.  I've learned how to speak insurance, and even then I'm always learning more about policies and their functions!  As an insurance broker, I want my clients to know how their policy works so they know what will happen should they *knock wood* have any need to use their policy.

Let's talk about your house or apartment.  You hopefully have homeowner's or renter's insurance on the place you call home.  If not and you're in CA, OMG you really should, call us today!  We'll help you out.

But I digress.  In these policies, let's say something happens and you have to replace your big, beautiful flat screen TV.  It's your pride and joy.  It cost you a whopping $1,200.  (Like I said, it's your pride and joy.)  Then let's say it's been damaged or stolen, and we have determined you will be reimbursed for the cost of replacing your TV.  Do you know how much you'd get back?

Most people don't know how to answer this question, so I follow up with this... is your policy Actual Cash Value or Replacement Value?  The answer makes a big difference.

What's the Diff?

Let's play out the above scenario.  For an Actual Cash Value (ACV) policy, you'd be given the depreciated value of the TV from the time you have the loss.  So if that $1,200 TV was bought 5 years ago, you know you're getting far less.  For a Replacement Value (RV) policy, you're getting an amount to purchase a new item of similar value.  

ACV policies tend to be cheaper than RV policies, so people often choose the cheapest policy thinking they'll never need it.  Then, when they need it, they realize what a bummer, they won't have as much to put towards your prize TV's replacement should something happen to your baby!  We all do it.  But it's worth examining the big picture costs.  How much does something cost you if something happens?  Worth weighing the options, isn't?  Now, go check your policy to see which you have.  I'll wait.

Side note: all policies are subject to a deductible first, remember!  And no policy is going to give you exactly what you paid for something.  Prices change, markets change, and so does technology.  Flat screen TV's are getting cheaper these days, so keep that in mind when you have a loss.

Which Should I Get Then?

Let's level here.  Replacement Value policies may not be best for you!  There are plenty of reasons you'd want an ACV policy, saving on a monthly bill being a big one.  My goal here is to help you make educated decisions on more than just the face value of the monthly costs.  Knowing the ins and outs of your policy will save you big time in the long run.

Important Tip!

Regardless of what policy you decide is best for your overall needs, there are a few thing future or current policy holders should do:

  1. Make a detailed inventory of all you own. 
  2. Asses the value of these items.
  3. Keep receipts of big ticket items.
  4. Evaluate your coverage with an Insurance Agent.
  5. Check in with your Agent once a year to make sure your policy still meets your needs.

We always forget when we make changes to our inventory. But don't forget us!  You'll be glad you remembered to share your new valuable with your Insurance Agent in the event of a loss.  Help us help you.  Once a year check-in is all you need.  And we'll be here, insuring your dreams and protecting your investments!

Source: https://blog.mercuryinsurance.com/home/actual-cash-value-vs-replacement-cost/?elqTrackId=03bb56279ce242c78c381921ae9006c9&elq=5ac94132262e425cb02c097230ddc710&elqaid=424&elqat=1&elqCampaignId=230

 

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