Some policies insure actual cash value (ACV)

ACV takes depreciation into account regarding an item’s worth. If someone makes off with your 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 an equivalent camera bought new today.¹

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.¹

Insurers cap losses on certain types of items

If you lose an insured television to a burglar, the insurer could reimburse you for the RCV. An insurance carrier can handle a loss like that. But, if a thief steals a highly valuable collectable out of your home, the insurer would probably not reimburse you for 100% of its ACV. It might only pay out a small percentage of what your priceless collectible is 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.¹

Did you know that losses away from home may be covered?

Say you bring your laptop on a business trip and it’s stolen. 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%, but still something.¹

Where you live can affect coverage as well as rates

If you reside in a community with rampant property crime, your insurance carrier might cap its reimbursements lower than you would like on some forms of personal property losses.¹

Now, do you have a home-based business?

If you do, you should know that homeowners insurance generally does not cover damages and losses to your residence resulting from or linked to business activity.²

Having a separate, discrete business insurance policy to protect your home-based company is important. Without such a policy, you have inadequate coverage for your business – and could you imagine losing your home from being uninsured against a visiting client’s bodily injury claim or a workers comp claim if employees work at your residence and hurt themselves?²

Reading the fine print on your homeowners insurance policy can be worthwhile

Recognizing the basic limitations of homeowners insurance coverage is critical. You should know what is and isn’t covered – and if you see any weak spots, you should address them.

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1. Investopedia.com, 2021
2. TheBalance.com, 2021

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