When you suffer a loss, your insurance policy can often come in to help cover the value of your lost property. However, it may not be readily apparent how they calculate the value of your possessions or property. This can lead to discrepancies between what you think the value of your lost property is and what your insurance policy determines the loss value. The money you get from a claim is determined by these factors: the type of policy you have, how well you describe the incident, and Actual Cash Value vs. Replacement Cost.
Your Policy Type
The policy you have determines some of your reimbursement. For example, you may have homeowners insurance, but you may not have flood insurance. Therefore, you would not be covered against damage from flooding. Your policy also has clearly defined limits. Your policy will help protect you up to the limit amount. There are some things that are not protected by your specific policy. For those items, you may need specialty insurance. The best way to determine what policy best suits your needs and your lifestyle is to call up your insurance agent. They will be able to recommend the coverage that works for your budget and that still keeps your protected against accidents.
Accurate Depiction of the Situation
One of the best things you can do is keep a home inventory. This is a list of your possessions and their values. For expensive items, it’s a good idea to keep the receipts. Have a copy your home inventory in a safe, secure location outside of your home in the event that something happens. And when submitting a claim, it’s best to take photos and videos of the situation. The more detail you have, the less likely that you will be at the mercy of the insurance company’s decisions.
Actual Cash Value vs. Replacement Cost.
The way that your policy is worded is extremely important. It will clearly outline the terms of the policy. Two important terms to know are actual cash value (ACV) or Replacement Cost.
ACV is the depreciated amount that the insurance company pays. This is the value of the item at the time of the loss. Imagine you were to sell that item at a garage sale – ACV is the price if you were to sell the item now. It typically is less than the replacement cost.
Replacement Cost is the amount that your insurance would pay you in order to replace the lost item. While this is usually preferable to the actual cash value, sometimes the replacement process is more involved to get the claim amount.
If you are ever in doubt about how making a claim works, the terms of your policy, or the best policy for you, then you should contact your insurance agent. They can help you work through any questions you may have about homeowners insurance. They can also help you navigate through your policy if you need! Being informed now before an incident happens can make a huge financial difference in the future.
Call an Encharter agent at 888.754.8299 to talk about your homeowners insurance policy!