How to Choose Personal Property Insurance

Insurance tips offered by most companies usually focus on the need to protect your property against hazards such as fire, accidental injury or other common perils. But few homeowners spend enough time selecting the right options for their personal property.

In fact, many assume that the automatic content coverage that comes with a homeowner policy is more than sufficient. Unfortunately, this isn’t always the case.

Failure to select the right coverage can be a costly mistake that may not become apparent until a catastrophic loss has taken place.

When it comes to protecting your personal property there are two main types of coverage available. They are Actual Cash Value (ACV) and Replacement Cost (RC). In addition to ACV and RC coverage, riders or additional policies are commonly used to insure high-value items. It’s a good idea to speak with your agent to determine the right type of policy for your individual situation.

ACV is the amount it would take to repair or replace your personal property, minus the depreciation. For example, expensive electronics rapidly depreciate and may be worth far less than the original purchase price. ACV is typically more affordable and therefore a good option for budget-conscious individuals.

RC is the amount it would take to replace or repair personal property with a similar style and quality. Many homeowners opt for RC coverage. Although RC coverage tends to cost a bit more, it is helpful when the value of an item has depreciated significantly.

Extended RC coverage provides additional protection by insuring an item up to 125% of its value, making it an excellent choice during periods of rapid price increases or economic inflation.

Guaranteed RC is the most expensive type of policy. It guarantees coverage to repair or replace an item even if it’s above the policy limit. There are typically limits to the total value of any single item, so be sure to ask your agent whether it would be more beneficial to obtain a rider or endorsement instead.