Replacement value is what it would cost to buy the same item new today — not what you paid for it, and not its current used-market value. A $1,200 sofa bought 5 years ago may cost $1,400 to replace today. Insurance policies differ: "actual cash value" (ACV) pays replacement minus depreciation; "replacement cost" (RC) pays full replacement. Always choose RC if you can afford the slightly higher premium.
Why most people under-claim
The average household owns 10,000+ items. After a total loss (fire, flood), you will remember the big things — sofa, TV, bed — and forget the small things that add up: spices in the pantry ($200), the tool bench ($1,500), bathroom linens ($400), kids' toys ($2,000+), books ($1,500). Walk your home with a phone camera first, then fill out this calculator. Photos of every drawer and closet are the cheapest insurance you will ever buy.
When to schedule items
Standard renters and homeowners policies cap certain categories: jewelry often capped at $1,500 total, firearms at $2,500, cash at $200. If you own a $5,000 engagement ring or a $4,000 musical instrument, you need to "schedule" it — add a rider to your policy that covers the full value, often with no deductible. Schedule anything worth more than $1,500 that falls into a capped category.
The 80% rule for homeowners
Homeowners policies require you to insure your home for at least 80% of its replacement cost. If you underinsure, the insurer pays claims on a prorated basis — even partial losses. Example: a $400k home insured for $240k (60%); a $50k kitchen fire pays only $37,500 because you were underinsured. Review your dwelling coverage every 3 years; construction costs rise faster than you think.