For the past four years my wife and I have lived in a multi-family building owned by my father. After we married, we decided to insure our wedding and engagement rings. Our insurance advisor asked us many questions to evaluate our current risks. He recommended we purchase a tenants policy to cover our belongings and provide us with liability protection in addition to the insurance for the rings. We decided to move ahead and purchase the additional policy. A few months later, we lost everything in a fire. If our advisor had not evaluated and identified our risks, we would have not been able to replace everything we had lost.
My father was not so lucky. He lost almost everything. The year prior he moved his property insurance to a new agent for a savings of a couple hundred dollars. The policy limits were all the same so it appeared the policy was providing the same coverages but at a cheaper price. But the new agent changed his policy from replacement cost to actual cash value. Replacement cost would have replaced what he had with new items of the same like, kind and quality. Actual cash value policies take the value of your item at the time of a loss and then subtract for depreciation. In my father’s case, he had about $90,000 in personal items lost and only received $15,000.
My father learned a valuable lesson that day. Now he is working with someone who helps him identify risk and control it effectively. He knows now that it is not only always about price; it is about value. Getting the best value means he works with someone who will educate him on what he does not understand.