What kind of property coverage is right for you?
Actual cash value or replacement cost?
When it comes to insuring your most valuable possessions, you have important choices to make. In the event of a loss involving your home or car, do you know how you'd like to be reimbursed? Does your current policy reflect these preferences?
Carefully evaluate these two types of coverage to ensure you're well-informed.
Actual Cash Value If you elect for an actual cash value insurance policy, you'll likely be compensated for the fair market value of the item at the time it was lost or damaged.
Pro: These policies often have less expensive monthly premiums, so you could insure expensive items for less. Con: The payout is not based on what you paid for the item. This means you could be out the difference if something has depreciated in value since you purchased it.
For example, if you had a wreck and wanted to replace the car you bought five years ago, you'll probably be accepting payment for what a vehicle of that make and model would fetch now, minus your deductible and wear and tear.
Replacement Cost Many agents recommend replacement cost insurance, especially for homeowners. This sets you up to be reimbursed for the full amount it would take to rebuild your home and replace everything in it.
Pro: You can replace older items for what they would cost to purchase new. Con: This option tends to be more expensive. Also, you must replace all items claimed to recoup the payout and you can't use the money for other things.
Keep in mind that multiple factorscome into play when determining how an insurance claim will be paid out, but by learning about your options you can set yourself up for success. Please reach out with any questions you have.