Little-Known Homeowners Insurance Facts
Updated: Jun 24, 2021
If you have a homeowners insurance policy, you should know what this insurance does and does not cover. In addition, these policies have their limitations as well as underrecognized perks.
Some policies insure actual cash value (ACV).
ACV factors depreciation into an item’s worth. If someone makes off with the expensive camera that you bought five years ago, a homeowners policy that reimburses you for ACV would only pay for part of the cost of a new equivalent camera bought today.
Other policies insure replacement cash value (RCV).
That means 100% of the cost of an equivalent item today, at least in the insurer’s view.
Insurer's cap losses on certain types of items.
If you lose an insured 42” flat-screen TV to a burglar, the insurer could reimburse you for the RCV, which is probably around $300. An insurance carrier can handle a loss like that. On the other hand, if a thief takes an official American League baseball (say, from the 1930s signed by Babe Ruth) out of your home, the insurer would probably not reimburse you for 100% of its ACV. It might only pay out $2,000 or so, nowhere near what such a piece of sports memorabilia would be worth. Because of these coverage caps, some homeowners opt for personal floaters – additional riders on their policies to appropriately insure collectibles and other big-ticket items.
Did you know that losses away from home may be covered?
For example, you have your laptop with you on a business trip. Your rental car is broken into, and your laptop is taken. In such an instance, a homeowners policy will frequently cover a percentage of the loss above the deductible – perhaps closer to 10% or 20% of the value above the deductible rather than 100%. However, if you have cash stolen during a trip, most insurance policies limit what they will reimburse you for; typically, around $200 to $250.