Replacement Cost Contents Coverage, Explained

For a more comprehensive insurance policy, consider purchasing replacement cost contents coverage. Read this guide to learn about what's covered.
Written by Brady Klopfer
Reviewed by Carrie Adkins
Replacement cost contents coverage fully covers your personal belongings in the event that they are destroyed or stolen by a covered peril, rather than just covering their value at the time they were lost.
Purchasing homeowners insurance or reviewing your
homeowners insurance policy
with an insurance agent can be a bit daunting. With so many different options, sometimes it's hard to which coverages you really need and what policy limits are appropriate for you.
Which brings us to replacement cost contents coverage. What is a replacement cost policy, and do you need it? Read this guide compiled by
to learn more.
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What is contents coverage?

Contents coverage is really just personal property coverage. It’s a part of your homeowners insurance plan that covers your personal items within your home, rather than the home itself.
Personal belongings include electronics, like your computer, TV, and video game system. Valuable items like jewelry, art, and baseball card collections are also considered personal belongings. All of these are covered by contents coverage.
Standard personal property coverage protects your contents in the event of a loss from theft, fire, and many other accidents, but usually not in the case of flooding, earthquakes, or damage that you are at fault for.
If you have contents coverage and your prized baseball card collection burns down in a house fire, you're covered. However, your laptop wouldn't be covered if you are at fault for its destruction.
MORE: Everything you need to know about laptop insurance

What is replacement cost coverage?

Replacement cost coverage is when your home insurance coverage pays for the cost of replacing an item, rather than just the value. The opposite of replacement cost coverage is actual cash value coverage, which only covers you for how much the item that was damaged was worth at the time.
Because most valuable items depreciate, replacement cost is a more valuable and comprehensive form of coverage from insurers than actual cash value coverage.

What is replacement cost contents coverage?

Think of replacements cost contents insurance as a combination of contents coverage and replacement cost coverage.
Replacement cost contents coverage is a personal property coverage plan that protects you for the entire cost of replacing your damaged items and personal belongings, rather than simply the value of the item at the time it was damaged. This is especially important with items like electronics, which can depreciate in value rapidly.

What is an example of replacement cost contents coverage?

Let’s say you buy a nice work laptop for $1,500. After a year of use, it might only be worth $700 after depreciation if you were to sell it. Then your laptop gets stolen, and you have to buy a new one.
With replacement cost contents coverage, you’ll end up with $1,500 (the actual replacement cost value) so that you can replace your stolen laptop. Instead of getting $700 for your claim to try and find a used laptop in similar condition to the one that was stolen, you get the full price to replace it from your insurance company.

What are the pros and cons of replacement cost contents coverage?

The benefits and drawbacks of replacement cost contents coverage are extremely straightforward. The benefit of this type of coverage is it gives you much more comprehensive coverage if something happens to your valuable items. The bad part is that you have to pay extra for that coverage.
If you can afford it, replacement cost contents coverage is a good add-on for your policy, and you'll rest easier knowing your personal belongings are covered. But if you can't afford it, having an actual cash value coverage for your personal belongings can offer you cheaper premiums, but less coverage.
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