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Replacement Value Insurance Coverage Gives Renters Full Protection
By Mike Heuer


Some renters insurance plans provide actual cash value coverage for belongings, others will pay claims based on the replacement cost. Replacement cost policies will pay the full amount minus any applicable deductibles to repair or replace damaged, destroyed or stolen personal effects up to policy limits.

There are several ways for a renter to determine the correct level of coverage to ensure true replacement cost coverage will apply instead of having policy limits that are less than what might be needed to repair or replace a damaged or destroyed home and other structures. Obtaining estimates on the value of items he or she owns helps a great deal. Once obtained, the highest appraisal amount should be used to determine the insured value of valuable items.

When using replacement value renters policies, it is necessary to keep informed on changes in the value and market costs of insured items. If the cost of new TVs should fall, for example, so will the replacement cost. In such instances, decreasing coverage limits might be in order. Regular adjustments in the policy limits for replacement cost renters insurance plans are critical for maintaining the proper level of coverage.

About two-thirds of households in the United States are undervalued on their insurance policies, even if they have renters insurance coverage. That means many renters are vulnerable to financial loss even if they have replacement cost insurance policies. If a rental unit is damaged or destroyed and causes loss to the personal belongings inside, there could be a large deficit to be paid in order to replace the insured items.

Because insurance providing replacement value of is more expensive than actual cash value policies, some renters might want to raise the deductible amount to make the monthly premiums paid more affordable. In general, replacement value policies cost about 10 percent more than actual cash value policies, but the difference is nominal when considering most renters insurance policies cost less than $20 per month.

And while many renters insurance policies provide replacement cost coverage for contents and personal belongings, some rare or highly valuable items that might be damaged or destroyed, such as jewelry, artwork or antiques, easily could exceed the policy limits. For special items, an insurance endorsement for replacement cost coverage would be worthwhile solution.

Mike Heuer is a former insurance producer in Nevada with expertise in Property & Casualty and Life and Health insurance. He also is a former newspaper reporter with 20 years’ experience in print media.