Personal Property Replacement Cost

Cost of Replacing Personal Property

Personal property is covered on an actual cash value basis, even though replacement cost coverage on structures has been available since the beginning of the homeowner's program. The Personal Property Replacement Cost Endorsement is an optional endorsement that transforms personal property coverage to a replacement cost basis. Like the replacement cost on building goods in the homeowner's form, the personal property replacement cost provision commits to pay losses to the subject property without depreciation reduction. Payment is paid on a replacement cost basis only if the property is replaced when the replacement cost of the loss exceeds $500. Coverage extends to things scheduled under the Scheduled Personal Property Endorsement and personal property insured under Coverage C.

Under the endorsement, four types of property are not eligible for replacement cost coverage:

Antiques, fine arts, and similar items are examples of such property.

Memorabilia, souvenirs, and collectibles, for example.

Property is not kept in a decent or usable state.

Obsolete items that have been kept or are no longer in use.

Because determining replacement cost is complex, the first two classes of property are excluded. These objects should be insured on a value basis and scheduled in the Scheduled Personal Property Endorsement (HO 04 61). Because providing coverage on such property would contradict the principle of indemnification and potentially result in heightened moral hazard, the final two property groups are excluded from the replacement cost criterion.

The endorsement provides replacement cost coverage on certain building items that are expressly excluded from the replacement cost coverage applicable to buildings: awnings, carpeting, household appliances, outdoor antennas, and outdoor equipment, in addition to replacement cost coverage on personal property.