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Replacement Cost Coverage Surges

tl-4Insurance replacement cost coverage applies to damage to your home and personal property.  As prices on just about everything increase, replacement cost coverage surges. But just how the coverage is applied can be confusing.

The fact that you have replacement cost coverage does not mean that every time something is damaged, it will automatically be replaced by your insurance carrier. Replacement will only be considered if the item is damaged beyond repair or missing entirely. Then the coverage is “new for old” so the item will be replaced with what is known as like, kind and quality and at current pricing.

Prices on electronics like TVs and stereo systems fluctuate constantly and that may cause confusion. There is usually a misconception that the payment will be based on the original cost of the item.

For example, your television may have cost $2000 five ago but can now be replaced for $1000 so the replacement cost is $1000. The point is replacement cost insurance is to replace the item, not reimburse you for a higher cost. Insurance policies are intended to indemnify you-not provide you with a profit.

Slash Your Home Insurance Premiums. Search for Lower Rates Most adjusters work with search engines that will check current pricing and in some cases they are able to arrange for actual replacement of items. This means that a detailed description of the item is required including the model, serial number and approximate age.

Replacement cost may also apply to coverage for your home. If your house is damaged beyond reasonable repair, the coverage would be the amount of your dwelling coverage limit plus an additional percentage stated in your policy. This feature varies widely depending on the insurance carrier and state laws that apply. It does not mean, as it did in the past, the home would be replaced regardless of cost. It is important that you make sure that the dwelling limit on your policy accurately reflects the cost to rebuild your home.

A common misconception is that replacement cost coverage applies to all structures on the grounds of the property. In particular, it does not apply to fences. If an entire fence needs to be replaced, it will be paid on an actual cash value basis, which is calculated as replacement cost less depreciation. Usually depreciation is based on the average life expectancy of the particular type of fence and the age of the fence.

Replacement cost coverage is a great addition to most insurance policies, especially as prices escalate but it’s important to realize that carriers pay the current replacement cost of your lost items. Damaged or missing items will be replaced with new ones that are exactly the same or as close as.

A four year old wide screen television that was stolen would be replaced with a new flat screen TV that is the same brand and has all the same features. The fact that it cost less than what you originally paid is not relevant in most instances.