Like me, you’ve probably seen Nationwide Insurance’s widely aired commercial touting their service, "Brand New Belongings." The eye-catching ads feature a sleek Cat-Women-like heroine coming to the rescue in every homeowner’s worst nightmare situations, stealthily following behind home-invading thieves to replace the items they steal, or swinging into a fire-damaged apartment to switch out smoke-damaged valuable with shiny, new ones. The narrator explains these entertaining scenarios illustrate Nationwide’s "Brand New Belongings" program, in which they "replace destroyed or stolen items with brand new versions," not just paying you their partial value.
After the ad ends, you may be left feeling insecure about your current coverage. "If I don’t have Brand New Belongings from Nationwide and I experience a loss, does that mean I’m going to be stuck with used, thrift store versions or my stuff?" Not necessarily – many policies from a variety of insurance companies offer the benefits extended through Brand New Belongings under the less catchy name "replacement cost coverage." Basically, this means that if you experience a loss or damage to your home or its contents, your insurance company should reimburse you for the amount it costs to replace the item with one of like kind and quality, not discounting the item’s value based on depreciation (subject to the terms and conditions of the policy, of course).
Replacement Cost Coverage is one of the two main valuation methods that can be applied when determining insured property’s value, with the alternative method being "Actual Cash Value." If your policy is based on Actual Cash Value benefits, you will receive a payment not based on the amount you need to buy your same item in a store today, but the amount that the item costs minus any depreciation costs that apply based on the time you’ve owned the item. So while you may need $3,000 to purchase the same version of your stolen laptop, if you’ve had that laptop for a few years, you may actually only receive a fraction of this amount.
As you can see, it’s important to know which method your policy employs, because it will make a huge difference in the amount of compensation you receive in the event of a loss. While the premiums on the Actual Cash Value policies may be lower, it can lead to more expenses and a huge headache if you ever need to make a claim.
Whether your policy features a valuation method based on Replacement Cost Coverage or Actual Cash Value, as with any of the elements of your insurance policy, it’s important to read the fine print so you know what to expect. For instance, with Brand New Belongings, you will initially be reimbursed only with the actual cash value of your property. Nationwide will then pay you any additional funds once you purchase the new item out of pocket and submit a receipt. Also, in some cases, Nationwide will only pay to have a damaged item fixed, not replacing it with a truly "brand new belonging." Of course, if you look closely at the bottom of your television, you’ll see a standard disclaimer that "exclusions and limits may apply," too, which is where the grounds for a dispute can often arise. It is important to consult your policy for the details of your coverage. Keeping this in mind, you’ll be in a position to hold your insurance company to their word and get all of the benefits to which your policy entitles you.