In a rental policy, how is coverage typically structured for personal property?

In a rental policy, coverage for personal property is typically structured as actual cash value (ACV). This means that in the event of a loss, the insurance company will reimburse the policyholder for the value of the personal property at the time of the loss, taking depreciation into account. Essentially, the amount paid is the replacement cost minus depreciation, reflecting the loss in value due to age and condition.

Actual cash value is a common coverage method in rental policies because it helps keep premiums lower compared to other methods, such as replacement cost, which would provide compensation without deducting for depreciation. While replacement cost might provide a higher payout, it is generally more expensive and may not be standard in all rental policies. Market value and extended replacement cost are not typical structures used for personal property coverage in rental policies, as they pertain to different valuation methods or specific policy enhancements that are less common in standard rental agreements.