A homeowners insurance policy is a package policy for the average homeowner that provides coverage for multiple things – most notably coverage for the dwelling, coverage for personal property owned by the insured (aka. ‘contents’) and coverage for personal liability with respect to the insured. Within a homeowners insurance policy is a form of coverage called ‘Personal Property Coverage’, usually listed on your declarations page as Coverage C. When there is a limit of coverage indicated on your policy for this form of coverage, then this means you have coverage for items deemed as ‘personal property’ – things like clothing, furniture, housewares, electronics, and non-permanently installed appliances to name a few. How these items are valued at the time of a covered claim is where the replacement cost provision comes into play. Unless explicitly stated on your policy, coverage for these items is valued based on their ‘Actual Cash Value’ at the time of the loss (in other words, the depreciated value). But for an additional cost, your insurance policy can be endorsed so that these items are instead valued at their ‘Replacement Cost’ (in other words, the cost to replace the item with a new, similar item). This has no effect on the actual limit of coverage selected, but rather an effect on how much you would be reimbursed for per individual item beacuase of how the items are valued.
So why am I really talking about this? Well, this ‘Replacement Cost’ endorsement can be expensive, and most people don’t really know about it. They don’t know what it covers, how much it’s costing them by having it, and they don’t know that they can remove it if they want to. On a recent quote I completed for a new customer, their rate dropped by over 22% by removing this endorsement only.
I personally always recommend quotes that include this endorsement, because I beleive in it's importance - but at the end of the day you are the homeowner and you are the one purchasing homeowners insurance, so you should make that decision.
If you think you are paying too much for homeowners insurance and you don’t feel like your agent is truly giving you all the options, request a quote from us. Although we recommend you buy the very best coverage available, we also understand that you may be looking for creative ways to save on homeowners insurance premiums in your Florida home – and one of those ways is reducing the coverage in some way. That’s where Evolve comes into play – we can provide you with options!
FAQ (Frequently Asked Questions)
- How can I tell if I currently have this coverage on my homeowners insurance? This will be noted somewhere on your declarations page ONLY if you have it on your policy. In most cases, it is a separate line item below the main coverage. If you are unsure, call your current carrier and ask them.
- If I remove this endorsement from my homeowners insurance, will my dwelling also be covered based on Actual Cash Value? No, removing this endorsement would not change how the dwelling is covered within your policy. The dwelling will be covered based on the provisions laid out in the terms of your policy but for site built homes, a standard homeowners insurance policy issued under the HO3 form will provide coverage for the dwelling based on Replacement Cost. This is only a general rule of thumb - some carriers may add additional restrictions on top of this so it's best to contact your current insurance carrier for information on how your policy applies.
- I have a mortgage; will I be able to remove this coverage and still satisfy their requirements for insurance? Yes! Your lender is only concerned in you insuring what they have an interest in – and that’s the building itself. They have absolutely no quarrels with the personal property section of coverage nor how you choose to insure it.
- I have special items (jewelry, furs, antiques, collections, etc.), how will making this change affect coverage for those items? The change would affect those items in the same fashion in terms of value at the time of a claim. But, it’s important to point out that even without removing this endorsement, items in the ‘special category’ have low sub-limits of coverage unless you have them scheduled onto your policy for their appraised values (sub-limits are usually $1,000 - $2,500 per claim, and apply to jewelry, furs, high end electronics, antiques, collections, silverware, goldware, pewterware, etc). TIP: You can schedule certain special items onto your insurance for an additional fee and still remove the ‘Replacement Cost’ endorsement. Scheduled items are covered for their scheduled value!
- I really want to see a homeowners insurance quote without this endorsement, what do I do? That’s easy – click here and fill out our simple quote request form and we’ll provide you with options in less than 2 business days!
We hope this taught you something you didn't know, and we hope it helps you to build trust in us – your local hometown insurance agency. We would love to be given the opportunity to offer you an insurance quote for your home, so reach out to us today and see what we can do for you.
Evolve Insurance Agency