The overriding thought about insurance is to put you back as you were before the loss, nothing less or nothing more. While your home (the structure, otherwise thought of as anything you’d leave behind if you moved), is covered as all risk. Let’s leave the specifically excluded perils behind for now. Conversely, your personal property (your contents, the things you take with you when you move), is covered by named perils only. Because insurance is designed to put you back as you were, they’ll often pay you a value equal the current value of your property at the time of the loss, but will pay you UP TO the replacement cost if/when you replace it. This answers the question about paying $5K for speakers valued at $15K. In theory, neither number matters. Insurance will pay you the actual cash value at the time of the loss, and if you have replacement cost, they’ll pay you the reasonable cost to replace the damaged speakers. This doesn’t even touch a discussion about specific limits within your policy and the thought that your music could be considered a collection or collectible.
Home owner's insurance question
Reading through my policy it would appear that through the personal property section an audio system is covered for loss. No special rider is necessary. But the replacement cost section states that the insurance company won't pay until you actually replace your stereo system. If one makes a big claim, let's say $100,000, how does one pay this first if you're going to get paid afterwards? What if you don't have the money to re-buy your system or you choose not to replace it? Can any insurance experts explain to me how these home owner policies actually work?