How It Works
Every homeowner policy covers household contents. However, the way contents are covered varies greatly depending on the type of policy. A cash-value homeowners policy means when you file a claim, your lost, stolen or damaged items will be paid out at a depreciated value. On the other hand, a replacement-cost policy pays for the cost of a similar item that was stolen or damaged. Depending on your situation, replacement-cost coverage can be affordable, but cash-value may be the better option if you are on a budget. Experts estimate that choosing replacement-cost coverage over a cash-value policy can cost you up to 15 percent more each month in premiums. 
A cash-value policy can give you peace of mind by adequately insuring your home and its contents in case of a loss, and it offers the benefit of lower monthly premiums, making it a more affordable option.
Cash-value Policy Considerations
A cash-value homeowners policy is a great option for some buyers. To decide on the right type of homeowners policy, analyze your home and possessions and create a list of all its contents. Do not wait until after a catastrophic loss to realize you failed to adequately assess your insurance needs.
Follow these four inventory tips to successfully analyze your homeowners coverage needs and prepare yourself in the event of a claim:
Four Inventory Tips for Homeowners
- Create an itemized list of everything that could possibly be damaged, lost or stolen in an incident, disaster or accident. Include household furnishings, equipment and any personal possessions.
- Identify items by providing the brand (if applicable), serial/identification number and a detailed description that includes color, size, style, features and any unique characteristics.
- Indicate the purchase or acquisition date for items on your list. Also include, if relevant, the purchase price. This is especially important for a cash-value policy.
- Keep multiple copies of your list—inside your home and somewhere safe offsite.
Do Your Research
When you buy a home, consider not only the cost of the house but also any insurance amount. Many homeowners overlook the coverages not included in a standard policy, such as flood and earthquake damage.
Review the Comprehensive Loss Underwriting Exchange (CLUE) report of your home to see what problems the house may have. If coverage will cost more than you expected, consider a cash-value policy as a budget-friendly option.
What Affects Home Insurance Prices?
1. Type of Construction: Certain building materials make the house less disaster-prone than others.
2. Age of House: Newer homes may qualify for discounts.
3. Disaster Resources: The proximity of help and disaster relief resources to your home.
Disclaimer: This brochure is provided for informational purposes only. The information provided herein is not intended to be exhaustive, nor should it be construed as advice regarding coverage. Eligibility for coverage is not guaranteed and all coverages are limited to the terms and conditions contained in the applicable policy.