Personal Property - Content Insurance

From the television in the family room to the shoe collection in your closet, your personal possessions are valuable to you. As part of your homeowner’s or renter’s insurance policy, personal property or “contents” insurance covers you in the event of a disaster or a theft that results in the loss of your belongings.

One key consideration of property/contents insurance is whether you need “replacement cost” or “actual cash value” coverage.

Actual cash value

“Actual cash value” means you are reimbursed for the current value of an item, based on depreciation. Even if your item is in mint condition, it is still considered a used item for insurance purposes. It’s kind of like selling your item “as is” at a yard sale or to a friend.

Replacement cost

In contrast, replacement cost covers the cost to replace your items if they are stolen or damaged in a covered event. It makes no difference how old that sofa was or its condition. Replacement-cost coverage allows you to get a new sofa of similar quality and style.

A standard homeowner’s policy might pay replacement costs on the actual home, but actual cash value on personal property. However, by adding on replacement-cost coverage, you can replace your belongings with new ones rather than be subjected to depreciation.

To decide whether you need replacement cost or ACV, create a complete inventory of your home’s contents through photos and videos. If you have a number of high-value items, consider adding on replacement-cost coverage.