You probably do not think much about theft or property damage in your home. These are not the most fun topics, but you will feel much better when you plan for them. Prepare for worst-case scenarios with compensation cost coverage!
Let’s first talk about the actual cash value
Actual cash value is also called fair market value. Here is an example to show how it works.
You come home and notice that the door has been forced open. You turn on the light and search the house.
You will not find your laptop and your stomach will drop. You should file a police report and file a claim with your home insurance company.
You bought the laptop for $ 800, but that was eight years ago. The amount you get for the laptop will be determined by the cost of replacing the device minus the depreciation.
It̵7;s another way of saying that the actual cash value gives you less than $ 800 for the laptop. In this scenario, you can not buy a new similar item without spending some of your own money.
How is the compensation cost coverage different?
Think of compensation cost recovery as an upgrade to the actual cash value. Instead of getting a partial payment for the laptop, you get enough to replace it.
In other words, you get the amount it costs to buy brand new items or rebuild your home.
This is how most home insurance works by default:
- You have compensation cost coverage for the structure of your home.
- You actually have cash value for the personal property in your home, like the laptop we mentioned. You can upgrade to reimbursement cost coverage for your personal property by adding a recommendation to your insurance. Your agent will help you with that.
Some insurance companies allow you to choose the actual cash value for the structure of your home. Do your homework before taking this path.
Reimbursement cost coverage can make your life a lot easier if you lose your home to a fire or tornado. Keep in mind that it pays for the equivalent, not upgrades.
What do we mean by that?
You may live in a home with two bedrooms and two bathrooms. Unfortunately, it has been declared a complete loss after a kitchen fire spread to the entire structure.
Reimbursement cost coverage would not pay enough to build a mansion or replace your regular TV with a home theater system.
You should involve a contractor or valuer if you need to replace your home after a disaster. They can give you exact prices for building materials and construction costs.
Measures to take after a loss
Here’s how to do it after a homeowner’s loss:
- Notify the insurance company or your insurance agent as soon as possible.
- Contact the police if anything has been stolen.
- Protect the property from further damage. You may need the help of an entrepreneur for this step.
- Collaborate with the insurance company. Give quick answers as they examine the statement.
- Provide an inventory of damaged personal property that shows quantity, description, fair cash value and amount of loss. Attach all invoices, receipts and related documents that justify the figures in the inventory.
Why you should create an inventory list
Things have a way of accumulating. You can go year without sorting through your stuff, so there is no better time than now!
An inventory list is exactly what it sounds like. You use an app or pen and paper to document all your belongings.
This process works well when you go through one of the worst case scenarios discussed above. You will have most, if not all, of the information that your insurance company will request.
Here’s what to do when completing your home inventory.
1. Take photos
Use your phone to quickly take pictures of the objects you are documenting.
2. Be careful
Update your list as you go from room to room. Or group it into categories such as appliances, clothes and equipment.
Open all cabinet doors. Count each spoon. Do not forget the vacuum cleaner in the closet or the tools in the garage.
Everything goes together.
Get behind white goods
Record serial numbers and model numbers for your electronics and appliances. Take care of some cleaning when you do this. Dust and clean behind appliances, then take a quick look at all the information.
4. Find out what not to keep
Do not list these items if they end up in a donation box or trash can:
- DVDs available on streaming services
- CDs collect dust
- Clothes that do not suit you
- Broken electronics
- Musical instruments no one plays (unless they are collectibles)
- Expired child car seats (yes, they have expiration dates)
5. Note large tickets
Think of your special collections that can include:
- Expensive musical instruments
You should ask your agent to put these items on a scheduled personal property policy. It extends coverage to valuables that would not be covered by a normal homeowners plan.
6. Share the home furnishings with your agent
Keep your agent up to date with your inventory list. This comes in very handy when dealing with a loss.
Contact your local Pekin insurance agent to put compensation cost coverage in place if you do not have it. It can really come through when you need it most.