Home Insurance Fact Replacement Cost


For the California Homeowner, what does replacement cost contents mean to you. Sounds like its a fairly easy idea but there are some catches in the policy. First,  you can't replace a collectable or a obsolete item. An antique can only be antique if its old, so collectables and antiques are under the actual cash value portion of the policy. The insurance company will try and replace your item with like kind and quality at its actual value. Then we have the interesting case of a fire loss. The insured had five televisions in the house, all of them operational. The replacement value of the televisions was $2500 but the insured only got a check for $1250.00. Concerned they called to find out what's up. Most insurance carriers settle a replacement cost loss by sending a check for the actual cash value until the item has been replaced. The insured was informed that they would receive the rest of the money after purchasing the replacement items. This seemed reasonable and it is in the contract. It prevents losses that occur to upgrade property in the home, not that anyone I know would do such a thing. So the insured replaced three of the televisions and received the extra payment and kept the actual cash value on the two televisions they no longer wanted. Seems like an backward way of doing things but the claims process worked quickly and well. The client got their money and the items were replaced. The key to contents coverage is being able to describe what you have. We at Ted Hamm Insurance recommend that a video file is kept that gives a look at the items in the house. Photos for the interior go a long way to reminding you what was in the house and allowing the claims adjuster that same opportunity. Of course, the file should not be kept in the house. We would not want it going up with the house. One last thought, I am often asked why the contents amount is so high. Some time try to establish the value of just one room, now don't cheat do it from memory. Its a pretty safe bet you will not be within 50%  of the replacement cost of the items in the room that you choose. I have  done this with several clients and it is amazing how the numbers hold true. Almost no one within 50%. Give it a try and let me know.


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