All homeowner policies automatically cover household contents, but the way they are covered varies greatly depending on the type of policy. When you file a claim with a cash-value homeowners policy, your lost, stolen or damaged items are paid out at a depreciated value.
On the other hand, a replacement-cost policy pays for the cost of a new TV similar to the one that was stolen or damaged. You get the full $1,000 back in the event of a loss, but at a cost of higher monthly premiums. Replacement-cost coverage can be an affordable solution. Cash-value may be the best option for homeowners on a budget. Experts estimate that opting for replacement-cost coverage over a cash-value policy could cost you up to 15 percent more each month in premiums.
Evaluate Your Options
A cash-value homeowners policy can be a great option, but not for everyone. To discover what type of homeowners policy you need, analyze your home and possessions by making a list of your home’s contents. Don’t wait until after a catastrophic loss or devastating natural disaster to realize you failed to adequately assess your insurance needs.
Carefully analyze your insurance needs and decide if cash-value coverage is right for you:
- Make an itemized list of everything that could possibly be damaged, lost or stolen in an incident, disaster or accident. Be sure to include household furnishings, equipment and any other personal possessions.
- Clearly identify the item by providing a brand name, serial or identification numbers, and a detailed description, including color, size, style, features and unique characteristics.
- Include the date the items were purchased or acquired on the list. This will prevent your possessions from being under-valued in the event of a claim. Also include the purchase price, which is especially important if you have a cash-value policy.
Why You Should Consider Cash-value Coverage
For many families, cash-value coverage is the most affordable solution. It gives you peace of mind by adequately insuring your home and its contents in case of a loss, but also offers the benefit of lower monthly premiums.