Homeowner’s Insurance policies and Renter’s Insurance policies include the option of purchasing “replacement cost” coverage. This costs more than lesser coverage’s but it is definitely worth spending some extra money to guarantee that you can afford to replace your goods if they are damaged or stolen.
If you don’t purchase “replacement cost” coverage, you will only receive an “actual cash value” settlement if your goods are stolen or damaged. This means that, the insurance company will only have to pay you what the goods were worth at the time, not what it cost you to purchase them new or what it would cost to replace them. Think about those brand new running shoes that you spent $150 on six months ago. It would cost at least that much to replace them now, but their “actual cash value” (i.e. garage sale value) might be less than half what it would cost to replace them!
There are limits to this type of insurance coverage, of course. You will only receive replacement cost reimbursement if you actually replace the items with “like kind and quality goods.” In other words, you can’t go out and buy gold plated tennis shoes to replace your stolen Nikes. This Coverage is a sound investment!
