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UPDATED: Mar 13, 2020
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Americans have a lot of “stuff.” Whether you own or rent your home or apartment, those “contents” needs to be insured. If you were to suffer a loss of any kind (fire, tornado, water damage, etc.) and do not have insurance, you will find yourself at the shopping mall re-purchasing everything you owned, while wearing only the clothes on your back.
Enter “contents insurance.” For the record, your “contents” include your clothes, electronics, furniture and any other belongings you own. Even though it’s an admittedly boring exercise, you may want to take a stroll around your abode with a pen, notepad, and calculator to determine how much stuff you really have.
The average person is stunned when they realize the value of their current possessions. Remember to look at the “cost new” to purchase your items when deciding the total value (and whether or not you want replacement coverage, see below).
Your old furniture, clothes and electronics may suit you just fine, but do you really want to replace those items by shopping on Ebay and Craigslist for items purchased several years ago that remain in that price range? Go to the store or look around online to see what they would cost in today’s dollars.
Home Content Insurance
There is not a lot to worry about when you have a homeowner’s insurance policy. Coverage “C,” also known as “contents” or “personal property” coverage is going to take care of your ‘stuff” in the event of a covered claim.
On the HO policy form, you can typically expect to have 50% of coverage “A,” which is the amount for which your home is insured.
For example, if your home is insured for $200,000, you can expect your contents, or possessions, to be insured for $100,000. Some insurers will allow you to reduce or increase the coverage amount based on your individual needs.
Contents Insurance for Renters
A common misconception among those of us who rent our homes or apartments is that our “contents” are insured by our landlord. THIS COULD NOT BE FURTHER FROM THE TRUTH. Let me say that again. You likely have no coverage for your personal belongings if you do not purchase renters insurance.
This means you would have to re-purchase everything you own if your leased home or apartment burned down. Many of us would never be able to recover financially if we suffered this sort of loss.
The good news is; a renter’s insurance policy is normally pretty cheap. You can expect to pay as little as $100 for up to $20,000 or more in coverage for 12 months. Your insurance premium will depend on many factors, including how much coverage you want, what perils you want to be insured against, and your credit.
What Are My Options?
You’ll have a few options when it comes to how you want to cover your contents. Let’s take a look at them.
Loss Valuation Method: Loss valuation refers to how you want the insurance company to determine what they pay you for your “contents” in the event of a loss. Your options will be replacement cost or actual cash value.
Replacement cost is the better, and more expensive, option. This loss settlement method does not depreciate the value of your belongings over time, whereas an actual cash value policy means the older your belongings get, the less the insurance company will pay you to replace them.
Coverage Form: As eluded to earlier, you will need to choose what losses you want to insure your contents against. You can pick basic, broad or special coverage. The coverage types are better and more expensive as they increase.
Basic coverage will insure you against the fewest types of losses…fire, lightning and removal (which means you have coverage for anything that happens to your stuff when removing your items out of a burning building for example).
Broad form coverage will insure you against some additional perils including wind, hail, aircraft, riot, vehicles, volcanic action, smoke and explosion (think gas main).
Special coverage (the best coverage type) means you are insured against anything that can happen to your belongings unless the cause of loss was specifically excluded in the policy (the exclusions are typically minimal and include losses caused by war or pollution).
You can expect your contents to be covered anywhere in the world with most policies. Contents insurance also insures your belongings when they are in your car. Auto insurance does not provide coverage for losses to any item in your car unless it was installed at the factory.
If you have further questions about contents insurance, speak with your insurance company or an independent agent.