Many people assume that their property insurance policy will pay to replace items, or even a building, at their replacement value, but that isn’t always the case. The payout on the claim will be affected by the terms set forth in your insurance contract. Your insurance agent can help you understand these definitions, as well as how your property value will be assessed. If your claim involves jewelry or other high-value items, you may be required to provide a professional appraisal before the loss.
Note that some older homes could be insured for substantially less than it costs to rebuild. Additionally, if the damage to your home results from a widespread disaster, the cost of rebuilding could be inflated due to greater demand. Ask your agent if you have enough coverage for this possibility and if your policy limits have kept up with the actual costs of contractors in your area.
Keep in mind that there are costs that may fall outside the value of the lost property, such as debris removal or upgrades to comply with new building codes. Make sure you understand to what extent these are covered by your policy.
