When buying a home insurance policy, you will likely be purchasing personal property coverage. This particular coverage is designed to cover your personal belongs in your home. So in the event of a loss, you can claim the items you have and the insurance company will pay to have those replaced.
Should this happen, would you prefer to have your personal belongings replaced with like kind and quality items? Or would you prefer the insurance company to document the age of the damaged item, depreciate the value of the item, and then be left to personally fill the gap between what you paid for the item and what the insurance company is willing offer you after depreciation? If you picked to have your personal belongings replaced with like kind and quality items, you opted for Personal Property Replacement Cost coverage!
Personal Property Replacement Cost is designed to "get you back to whole" in the event of a covered loss to your personal property. The coverage allows you to receive or purchase brand new items based off the value of the item when it was brand new. Without this coverage the insurance company would depreciate your personal property and only provide you with the value of the item at the time of the loss. Obviously this is not ideal, and in a way, not having Personal Property Replacement Cost defeats the purpose of having coverage on your personal property. A good example of an item that you own and would have to take into account depreciation is on your automobile. In the event of a total loss to your car, the insurance company would only pay out what the vehicle was worth at the time of the loss and no more. While that is understood with automobiles, it doesn't have to be that way with your other personal belongings. Say you have a furniture set that is two years old and was purchased at $2,000. Two years later that furniture set is not going to be worth that, but with Personal Property Replacement Cost, we would go out and try and find you the same furniture set or one of very similar price and quality and replace the item for you. This is a lot more convenient for the customer over being told by the claims adjuster that they are only going to give you $500 due to age and depreciation and leave you stuck with coming up with the additional cash to replace the furniture set. So with that said, make sure to have Personal Property Replacement added to your home, condo or renters policy's to make sure you're getting covered the proper way!
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