Understanding Insurance Adjustments

Why Some People Choose Guaranteed Replacement Coverage With Home Insurance

When you purchase a homeowners insurance policy, it is very important to find out what type of valuation system they use for calculating claims, and there are three main types. Of these types, the best type of coverage you can have is called guaranteed replacement cost coverage, and here are a few things to understand about this.

The alternatives

The two alternatives to guaranteed replacement cost coverage are cash value coverage or actual value coverage, and replacement cost coverage. There are several key differences with these types of coverage compared to guaranteed replacement coverage, and the main difference involves the way the insurance company calculates how to reimburse you when your house and belongings are damaged.

With actual cost coverage, the insurance company will base the amount they give you on the actual value of your house and things you own. With this method, the compensation value has nothing to do with how much it will cost to replace your things. It only involves calculating the actual value of the items. For example, if you have an old dining room table that you paid $1,000 for, the insurance company will only give you $200 if that is the amount it is currently worth.

Replacement coverage works by giving you an amount to cover the costs of replacing the things you own. In the case of the dining room table, the insurance company may give you $1,500 if that is what it would cost to replace the table.

How guaranteed replacement coverage works

Guaranteed replacement coverage is the best type of coverage of all the types, because it will not only compensate you for the replacement costs of your things, but it will give you extra. The extra amount could be up to 25% higher than the actual amount you will have to spend to replace the things you lost.

The benefits of choosing this option

Choosing guaranteed replacement coverage will cost you a little more, but it will offer more security to you. If your house is destroyed in a fire, you can be certain you will receive plenty of compensation to rebuild the house and purchase all the things you had in it.

If you are not sure which type of coverage to get, talk to an agent. Your agent can help you learn more about the differences with these types and will help you choose the right type for your budget and needs.