Actual Cash Value vs. Replacement Cost
Many times renters will purchase a policy not knowing how the claim will be paid out until you suffer a loss. You will need to consider how you want your belongings to be covered: “actual cash value” or “replacement cost coverage.”
Actual Cash Value coverage will pay only for what your property was worth at the time it was damaged or stolen. So, if you bought a television five years ago for $500, it would be worth significantly less today. While you’d still need to spend about $500 for a new TV, your insurance company will pay only for what the old one is worth, minus your deductible.
Replacement cost coverage, on the other hand, will pay what it actually costs to replace the items you lost (minus the deductible). Replacement cost coverage will cost you more in premiums, but it will also pay out more if you ever need to file a claim. Let your agent know about any particularly valuable items you have. Jewelry, antiques and electronics might be covered only up to an amount that won’t pay for their replacement.