A renter’s insurance policy covers the financial damage done to the resident or tenant of the house or home. However the actual amount of financial damage can be categorized into replacement cost or the Actual Cash Value (ACV). The replacement cost is the amount that is required to buy brand new goods which are similar or identical to the ones that are damaged. On the other hand, the actual cash value will give out a sum that is equivalent to the depreciated amount of that product/s.

• This means that opting for a replacement cost policy seems a better alternative; however if the probability of damage occurring is low then you can choose ACV. Since ACV will require lesser amount of money to be shelled out, the policyholder is relieved of paying a lofty sum for protecting his or her belongings.
• The decision of choosing between a replacement cost and an ACV will also be governed by the items that are covered. Usually items such as stereos, televisions and other expensive electronic equipment may be covered. However in cases where the policyholder has possessions such as jewelry, gold, or guns then the cover that is offered is usually very limited.
• If you do have these possessions then it would be advisable to either cover such items (jewelry, guns) in another policy. Furthermore it is advisable to take photographs as well as video shooting of the possessions. It may prove out to be admissible evidence for the insurance providers and give you accurate compensation.
• The shelf life of the possessions is also important since the depreciation in the price of a TV will be different from the rate of depreciation for an iPod. Therefore it is important to note the warranty period of each item and prioritize expensive items that have longer shelf value. This way they will be protected for a longer period of time.
• For instance a glass ashtray is bound to break sooner or later if it is used on a regular basis. However a television set will remain protected for a long time and even though fragile, the probability of breaking is less. In such cases for the ashtray an actual cash value option will be suitable and for the television a replacement cost policy will help in lengthening its life.
• Another factor that governs the amount that you pay for the policy is the area where you live. If you are residing in a theft prone area then the policy may be financially dearer. However, in such cases it is best to go for replacement cost policies since anyway the policyholder pays more in such theft prone areas. However, if you reside in a tranquil community then opting for an ACV can prove out to be financial prudence.
• Furthermore it is also advisable to read up about the various options available on the internet. You can also contact a financial advisor if you plan to buy other financial products or if your possessions are extremely expensive. In such cases professional advice can save you some money and will also educate you about the various options that are at your disposal.

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