Although most people understand insurance, there is a type known as content coverage home owners insurance. This type of insurance is designed to cover not the property itself but the contents of the home. This type of coverage is designed to protect homeowner’s belongings from certain types of risk such as theft or fire. This means if someone breaks into a home and steals a computer or the furniture is ruined in a fire, insurance helps to cover that loss. Before purchasing this insurance though, it’s important to understand the type of coverage and what losses it covers.
Actual Value Versus Replacement Cost Coverage
When purchasing this coverage, there are two types of personal property coverage. Replacement cost coverage is an option that provides reimbursement for the cost of replacing a stolen or damaged item with one that is a similar type and quality. The actual cash value coverage will factor in the depreciation of the item. This means that a claim filed on a television that’s five years old will not cover the original cost but a percentage of the cost.
Coverage Limits
Regardless of the contents insurance, it’s also important to understand how much coverage the policy provides. The coverage limit is the maximum amount of money that the policy will pay after a covered loss. For example, some policies provide $50,000 in coverage. If a fire damages an estimated $70,000 worth of belongings, then homeowners will need to cover the additional $20,000 out of pocket. When purchasing this type of insurance, it’s typical to choose coverage limits. An insurance agent can help to review coverage options and which option would be the best choice. Keep in mind that coverage limits can be changed over time as well.
Scheduled Personal Property
Once homeowners have decided on how much coverage they want, it’s also a good idea to review any limitations that apply. Standard coverage usually limits how much is paid out for certain types of belongings such as jewelry. Think about having a diamond ring stole. While a personal property coverage may be higher than the estimated value of the ring, owners may find that that a standard policy provides limited coverage that does not cover the value of the jewelry.
Taking Inventory
For anyone who has this coverage or is considering purchasing contents insurance, take a home inventory initially. Take inventory of any expensive belongings and also take note of any specifics such as serial numbers on electronics and makes, models, or years of belongings. If possible, attach any official documentation such as appraisals to the home inventory. Documenting how much items are worth can give an idea of how much coverage is needed. It will also come in handy if needing to file an insurance claim.
Although many people do not have content coverage home insurance, it is a good idea for any homeowners who want to cover the items in their home. Keep in mind that this type of insurance does not cover the house itself, but only the contents of the house. Review this type of insurance with an agent to decide if it’s a good option.
