Are the items in your home financially protected and safeguarded in the case of a disaster? If you own a home and have homeowners insurance, your homeowners contents coverage can help you protect your belongings in the case of a covered loss. Read on for tips on how much personal property coverage you may want to consider as a homeowner and how to work with your insurance agent to make sure you and your belongings are protected.
What is homeowners insurance personal property coverage?
Personal property coverage, also called contents coverage, is the portion of your homeowners insurance policy that covers your belongings. We like to say this refers to any items that would “fall out” if you were to turn your home upside down and shake it out, such as furniture, clothing, electronics, power tools, home décor, and more (this usually does not include affixed items like countertops, cabinets, light fixtures, etc.). Items like jewelry, furs, cash, collectibles and valuables may also be covered, but oftentimes are subject to sub-limits and may require specialized coverage.
Most homeowners insurance policies can also offer coverage for items damaged by a covered peril outside the home, though this coverage is generally just a portion of your policy limits. If your laptop is stolen from a coffee shop, for example, your home insurance would likely help cover the cost of replacing it – subject to the type of contents coverage you have, your deductible and the sub-limits on your policy.
There are generally two types of contents coverage under a homeowners insurance policy – actual cash value and replacement cost. These coverages have distinct differences, so you’ll want to make sure you understand which of the two your policy offers.
Should you choose actual cash or replacement cost?
Key to evaluating which type of coverage is right for you and your home is understanding what they mean. Generally, actual cash value pays you the value of the item at the time it was damaged or stolen, while replacement cost typically pays out the amount it would cost to replace that item with another of like kind and quality today. Both coverages are subject to what your policy covers, your deductible and your policy’s limits.
Say you bought a TV two years ago for $800 and had a covered loss. Today, that exact TV (the model, make, and in used condition) is selling on the market for $300. If you had actual cash value, your insurer would pay you $300 (subject to your deductible), since that is how much that television is currently worth. However, to purchase a new TV of similar style and features would cost $700. If you had replacement cost coverage, your insurer would likely reimburse you for the $700 (subject to your deductible), so you could replace that television with something similar.
Since replacement cost usually has a higher payout in the case of a claim, you may pay a higher premium for a policy that includes this coverage. There’s no right answer; it all depends on your situation. At InsuraMatch, we usually advise our customers to go for replacement cost, so there are fewer surprises in the case of a claim. Chat with your insurance agent to come up with the right kind of policy valuation and payout for your situation. Wondering what to choose? Give one of our agents a call at (844) 522-0543.
How much personal property coverage do homeowners need?
If your home were completely destroyed in a fire, you would likely be responsible to pay for anything out of pocket that is not covered by your insurance. That includes the belongings in your home. If you have $200,000 worth of belongings but only $100,000 in personal property coverage, you wouldn’t have enough coverage to help you replace all of the things that make your house feel like home.
We almost always recommend ensuring you have high enough personal property coverage limits to cover the cost of replacing all of your covered belongings. If everything were totally lost, you would want to be adequately covered to get your life back on track quickly and smoothly.
Wondering how much coverage you need? Call one of our expert insurance advisors for advice: (844) 522-0543.
How much personal property coverage do I have?
Personal property coverage is often somewhere between 20% and 50% of your dwelling structure limits on your homeowners insurance. For example, if you have $250,000 in dwelling coverage and your personal property coverage offers 40% of those limits, then you would have $100,000 in contents coverage.
If you see your personal property policy listed as a percentage of your dwelling coverage, make sure to do the math to see just how much coverage you’re really getting. The percentage may sound high, but when you add up all the items in your home, you might come to find that the typical personal property coverage may not actually cover the cost of replacing all of your belongings.
Stop for a moment and just take a look at the room around you (if you’re in your home). Do a quick estimated tally of all the items around you: the couch, the TV, the electronics, the tables, the dog toys, the vacuum, the artwork, etc. How much would it cost to replace your belongings in just this room? Probably more than you expect. Most people tend to undervalue the belongings they have in their home.
That’s why we highly recommend conducting an assessment of all of your belongings to come up with a thorough home inventory, so you can make sure your personal property coverage limits are high enough in the case all of your covered belongings were destroyed by a covered peril).
What is a home inventory?
A home inventory is basically a list of all of the items in your home and their associated values. This helps you keep track of the value of your belongings, and can come in handy if you need to let your insurance company know what you own and how much it’s worth, in the case of a claim. For a full home inventory, you’ll want to consider itemizing everything along with receipts, photographs, current valuations, and other documentation that can help the insurance appraiser understand how you came up with the value for that item.
Which scenarios are covered by personal property coverage?
Your personal property coverage usually has the same covered perils as your homeowners dwelling coverage. If you have a named peril policy, then typically only those perils that are explicitly listed in the policy are covered. If you have an open peril policy, generally the policy covers direct physical losses caused by all perils except those that are excluded. Most homeowners policies don’t include flood and earthquake, so you’ll want to consider purchasing separate policies to cover these scenarios.
Make sure you take a look at your homeowners policy to get a good understanding of what is and isn’t covered—and work with an agent to fill in any gaps that you find.
What about high-end valuables?
Your personal property coverage may not cover all of your belongings. Oftentimes, your policy may exclude or have a sublimit for high-end valuables or collectors’ items such as fine art, jewelry, furs, or certain collections. When you’re creating your home inventory, you’ll want to point out any high-value objects to your insurer to make sure they will be covered by your policy. If not, you may need to look into purchasing a separate endorsement or rider for your valuables. Check out this guide to insuring your valuables with homeowners insurance for more information.
Are your belongings covered?
Do you have enough personal property coverage? If everything were lost tomorrow in a covered loss, would you have adequate coverage to replace your belongings? If you’re not completely confident, it may be worth conducting a home inventory or speaking with your insurance agent. The best coverage is coverage that offers you the right protection for your home and specific situation.
Examine your homeowners insurance with expert advice from our insurance advisors at (844) 522-0543 today.
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