Published: August 2016
Whether you own or rent your home, the value of your stuff can quickly add up. But what if the contents of your home — furniture, electronics, clothing — were damaged or stolen?
The good news is that renters, homeowners and condo insurance policies usually include coverage for the contents of your home — described in most policies as personal property coverage. This coverage typically helps protect belongings from certain risks, such as fire or theft. So, if someone breaks into your home and steals your laptop or your clothing and furniture are ruined in a fire, you may find that insurance helps cover the loss.
It's important to understand, though, the type of coverage you have as well as how much your policy may pay after a covered loss. Here are some things to consider.
When you purchase a homeowners, renters or condo insurance policy, you'll typically have to choose between two types of personal property coverage. Replacement cost coverage typically helps reimburse you for the cost of replacing a damaged item with one of similar type and quality, the Insurance Information Institute (III) explains. Meanwhile, actual cash value coverage usually factors in depreciation of the item, the III says. So if you filed an insurance claim after your five-year-old television was stolen, a policy with actual cash value coverage would likely reimburse you for a percentage of what you paid for it. Meanwhile, a policy with replacement cost coverage would likely provide enough coverage for you to purchase a replacement in today's dollars.
Regardless of what kind of contents insurance you have, you'll want to be aware of how much coverage your policy provides. Your coverage limit is the maximum amount your policy will pay out after a covered loss. Suppose your policy provides $50,000 in personal property coverage. If a fire damages $70,000 worth of your belongings, you would likely need to pay out of pocket to replace the $20,000 in items that exceeded your coverage limit. You can typically set your own coverage limits when you purchase or update your policy. Your agent can help you review your current coverage so you can determine whether you may want to increase your personal property coverage limit.
Once you've considered how much personal property coverage is right for you, it's also a good idea to review any limitations that may apply. For instance, standard coverage typically limits coverage for certain types of valuable belongings like jewelry and furs, the III says. Suppose your diamond ring is stolen. While your personal property coverage may be higher than the value of the ring, you'll typically find that a standard policy provides more limited coverage — for example, only up to 1,000 for the theft of a piece of jewelry.
That's where scheduled personal property coverage may help. Scheduled personal property — often referred to as a rider, floater or endorsement — is an optional coverage you can purchase to provide additional protection for certain valuables such as art, antiques, furs, jewelry or musical instruments. To schedule an item, you'll typically have to have a recent receipt or have the item professionally appraised, according to the III. Other benefits to scheduling items may include coverage for a greater number of risks and no deductible payment in the event that you need to file a claim.
So, how do you know how much coverage — and what type — is right for you? One way to start is by taking inventory of your belongings. In addition to listing or photographing your belongings, include details like serial numbers on electronics, makes and models, and year of purchase, suggests the III. It's also a good idea to attach any official documentation, such as receipts and appraisals, to your home inventory. Documenting the stuff you own, from electronics to shoes, can help give you a clearer picture of what you own and how much it's worth. That may help you decide how much personal property coverage you need, and may also come in handy in the event that you need to file an insurance claim.
A local agent can help you review your existing personal property coverage and answer any question you may have. Armed with a better understanding of how insurance helps protect the contents of your home, you will be better prepared as you select the coverages that are right for you.