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Home owner's insurance question

Reading through my policy it would appear that through the personal property section an audio system is covered for loss.  No special rider is necessary.  But the replacement cost section states that the insurance company won't pay until you actually replace your stereo system.  If one makes a big claim, let's say $100,000, how does one pay this first if you're going to get paid afterwards?  What if you don't have the money to re-buy your system or you choose not to replace it?  Can any insurance experts explain to me how these home owner policies actually work?
philharmonicpete
millercarbon's avatar
millercarbon
324 posts
 
But the replacement cost section states that the insurance company won't pay until you actually replace your stereo system. If one makes a big claim, let's say $100,000, how does one pay this first if you're going to get paid afterwards?  


Yeah. If only we had some way of providing money now and paying it back later. Like, a credit. Of course having the money now is worth more than having it later, so you would probably have to pay back a little more than the credit. Lotta complicated details to be worked out. Probably never happen. Not in a million years.
ericsch
180 posts
 
As an ex insurance guy, @@dweller and @tuberist are correct. You get the actual cash value of each irem first and then the remaining $ after you actually replace the irem. The policy covers full replacement cost only if you replace. You can replace with a similar item, it does not have to be the same manufacturer or model.
ericsch
180 posts
 
Also, keep in mind that personal property is covered for specific named perils, unlike the dwelling which is covered for "all risks". A rider can be purchased to cover PP for all risks.
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cleeds
2,065 posts
 
ericsch
... personal property is covered for specific named perils, unlike the dwelling which is covered for "all risks" ...
It’s uncommon for a homeowner’s policy to cover all risks. For example, you need separate flood insurance if you want that protection. Many policies exclude earthquake coverage - that requires an additional premium. It’s always best to read your policy - although few do - and consult with your agent.

"Civil insurrection" is another common exclusion.
ericsch
180 posts
 
@cleeds Yes, of course there are some exclusions. I was just trying to keep it basic. After all, this is an audio forum.
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