New to having homeowners insurance? If so, it can be confusing when it comes to knowing what exactly is covered by your new policy. While ready the policy from cover to cover will give you the answers, you still may have some questions. Be sure to ask your insurance agent about these things:
What Items Have Limits
One item that is not always clear if you have coverage for is jewelry. This is because jewelry can be either very cheap or very expensive, and is also a prime target for theft if you have a break in.
Your insurance policy may have limits on either how much they will cover for a single piece of jewelry, or how much they cover for all the jewelry in your home. For instance, if you have a bunch of cheap fake jewelry you will most likely have coverage under either set of rules. However, you may have problems trying to replace your wedding ring since it is worth a lot of money.
The same rules can apply to other items in your home, such as artwork, furs, and firearms. Ask your agent about what kind of coverage you have, and find out if you need to buy coverage for specific high-value items that you have.
Replacement Cost vs. Cash Value
Your insurance will deal with replacing your personal property in a couple of ways, and it is important that you understand both of them.
It is common for an insurance company to offer you the actual cash value of an item that was lost or damaged. This means you will be given the fair value of the item with depreciation factored in. Depreciation is typically based on a specific percentage of the item for every year you've had it, with limits on how much an item can depreciate. For example, a couch lost in a house fire may be depreciated at 5% of its value for each year you've had it, with at most a depreciation of 30% of its value.
The other method for paying out on an item is to give you the replacement cost. This is the value of an item if you were to place it with a new one today. If you lost your laptop, you wouldn't have to buy the exact same laptop made five years ago, and you could get the full value of a comparable laptop today.
Your home insurance agent can tell you how items are paid out in a loss, and if certain rules apply to certain items.