Replacement Cost Coverage for Personal Property under Florida Homeowner’s Insurance Policies

When you purchase Florida homeowner’s insurance, you are protecting your home as well as all of the personal property contained within it. However, many homeowners fail to understand the differences between replacement cost coverage and actual cash value. Here, we have outlined how you will be reimbursed for your property in the event of a disaster.

What is Actual Cash Value?

Most Florida homeowner’s insurance policies provide you with what is known as the ‘actual cash value’ of your personal property in the event that it is damaged during a disaster or stolen. This is not the amount of money that you actually paid for your property; this is the amount that it will cost to replace the property after depreciation. For example, if you had a nine-year-old television that you paid $800 for when it was new, you will not receive $800 if the television is destroyed or stolen. Rather, you will receive the amount that the insurance company deems the television would be worth after nine years of depreciation—this is the actual cash value of your television.

What is Replacement Cost Coverage?

These days, many Florida homeowner’s insurance companies are offering what is known as replacement cost coverage instead of providing the actual cash value. This provides you with more coverage in the long run. Using the above television example, the insurance company would not provide you with the actual cash value of your television under this type of policy. Rather, you would receive an amount of money that the insurance company deems necessary to replace the television you lost in its current condition—and this is often more money. This type of coverage is also available with automobile insurance policies, as well.

How the Insurance Company Determines Actual Cash Value or Replacement Costs

There are many factors that go into determining the actual cash value or replacement cost of the property you lose during a disaster or theft. In most cases, the insurance company will consider things such as the purchase price at the time that the item was new as well as depreciation and estimated wear and tear. In the case of determining the replacement cost, the company will check with various vendors to determine how much a replacement product will cost. For this reason, the insured typically does not receive a check; the funds will be paid directly to a vendor who will ship or deliver the replacement products to the insured.

Why Replacement Cost Coverage is Better

In the event that your home or property is involved in a disaster or theft, it is likely that you will lose some valuable property that you could not otherwise live without. While jewelry and certain other luxuries can wait for replacement, it is unlikely that you will be able to get through each day without things like a stove, a furnace or a refrigerator. When the Florida homeowner’s insurance company only pays the actual cash value, this is often not enough to replace the products you lost—and this can lead to serious financial hardship. For this reason, you should always consider the advantages of replacement cost coverage.

There is no denying that replacement cost coverage is often more expensive than traditional coverage, but if you lose your personal property in a fire, a storm or even a robbery, it can certainly prove invaluable. In most cases, this coverage is often more affordable than you may think.