Why You Need Replacement Cost Insurance

How would you cover the costs of repairing or replacing damaged items from a storm, or stolen items due to theft in your home?

If you don't have replacement insurance, you might want to think about getting it. This article will help you to appreciate why.

Replacement Cost Insurance Example

You come home to discover that your big screen TV has been stolen. You might figure, "This sucks, but I'm glad I insured it." You double check your policy, and yes, your TV was insured for $2,000. Good move on your part.

But a similar, even identical TV can now be purchased brand new for less. That said, your insurance company may not necessarily pay you the full amount you insured it for originally. If the same TV costs $1,000 today, that's what they're going to pay you to replace it.

Now that sucks. You just lost $1,000. But with a brand new $1,000 TV like the one that was stolen and you didn't pay anything out of pocket.

Let's look at another scenario. And this time, it works in your favor. Your brother works in roofing, and he gave you a huge discount to replace the entire roof, charging you only $6,000 for everything.

Then a few years later, a hurricane obliterated your roof, so now you need to replace it once again. But this time, you are unable, for whatever reason, to have your brother do it for the same price he charged you a few years ago.

This is where replacement insurance works in your favor. Your insurance company is going to pay you what it costs today for the replacement of your roof, not what you paid a few years ago. So you'll get a brand new roof and you'll be completely reimbursed for it – sweet!

How to File a Replacement Cost Claim

When you have a valid claim to file is that your insurance company will give you a limited time to take care of your claim, from the actual filing all the way to replacing the damaged or stolen item. Some companies may allow up to 180 days, or six months to file the claim.

In the case of repairing damaged items, like a roof, save any receipts or invoices to document your claim. Just stay with the program and do whatever is needed. Once the repair is done, and you've handed your supporting documents to your insurance company, they can then process your claim, and mail you a check to reimburse you.

That means, in most cases, you will have to pay for the repair first. However, some companies may work with you and the roofer, and pay the roofer directly once the repair is done.

In the case of replacing a stolen TV, you need to purchase yourself first. But if you're short on funds, a 180-day window will allow you time to get the money you need to purchase the TV. Once the purchase is made, you then give a copy of the receipt to the insurance company. They can then send you a reimbursement check.

How Much Does Replacement Insurance Cost?

The cost to get replacement cost insurance in Texas can vary from one customer to another. You may have different items to insure, and the amounts needed to cover the cost of replacing them can vary as well.

For example, one person may just have a car and a few valuables. Their cost for replacement insurance for these items may be $30,000. Another person may have that and more. They could have collectibles, valuable antiques, perhaps even artwork, a Harley, and a restored classic car in the garage. They have a lot more to insure, so the cost for their replacement insurance is naturally going to be more than the first person.

Texas insurance prices can vary depending on what part of the state you live in. If you live on the Gulf, where hurricanes are common, your chances of sustaining damage are pretty high. So then the insurance company is going to charge more based on that alone.

Also, if you live near or in a high crime area, your chances of being a victim of theft are also pretty high. That means your theft insurance is going to be higher than other areas.

Don't be afraid to compare insurance rates for Texas property insurance.

Will My Property Get Replaced?

If you have something valuable stolen, like a large LED TV, some things have to happen. First, let's assume that the TV was insured when you bought it. You paid $2,500 a few years ago.

Get used to the idea that the same TV you bought a few years ago can be purchased for considerably less today. So the insurance company is only going to reimburse you for today's cost to replace the TV. And, by the way, you will have to first buy the TV yourself, properly file your claim with all necessary documentation, and do it all within their time limit, which can be up to six months.

If you're replacing your roof due to storm damage, you may need to pay for it upfront, turn in your bills with your claim, and you may also have up to six months to get it all done. Check with your insurer if you are not sure.

So these are just a few factors that determine whether your property will be replaced or not. The biggest factor is you. If you are diligent in getting your claim filed, documenting it as thoroughly as you can, and do it all within the prescribed timeline, it's a definite yes.

150 How Replacement Cost Insurance Works

For this example, we're assuming that the item in question is insured. You have a valuable item stolen from your home, maybe a laptop. You bought it 5 years ago for $500. But you already know that you can buy a similar laptop for less today than what you paid for it 5 years ago.

When you file your claim, know that you will have to purchase the laptop yourself, turn in your receipt with your claim and documentation. Then the insurance company will process your claim and send you a check to reimburse you for the price you paid for the replacement laptop.

Please note: If you had personal, private information on your laptop at the time it was stolen, take immediate steps to guard it. Alert your bank, credit card company and anywhere else where your personal information could be compromised. Also ask your insurer what to do if the laptop is somehow recovered.