Home and contents insurance is commonplace for homeowners, even if they’re unaware of it. Contents insurance is typically referred to as personal property coverage, and it’s necessary in any home insurance policy. If something unexpected happens to your home at the hands of a criminal or Mother Nature, your home and contents insurance is designed to protect your financial assets, your future, and your peace of mind. This insurance covers the cost of your home repairs if it’s repairable, or the cost of replacing your home if it’s not. The contents portion of this insurance policy is designed to cover the cost of replacing your personal items lost, stolen, or destroyed in your home. If you’re not sure how it works, it’s time to educate yourself about how home and contents insurance works to protect you as a homeowner or renter.
Personal Property Protection
If your home is burglarized or natural disaster occurs, Youi home and contents insurance pays you to replace the items you lose. The items you purchase and keep in your home are of value both financially and emotionally to many homeowners. While no insurance agency can replace the sentimental value of a lost or destroyed personal item, the company can compensate you for the loss to help you replace the items you no longer have.
Let’s say your home is burglarized and someone takes your electronics and jewelry. Your home and contents insurance will provide you with a payment minus your deductible, to replace these items. The items are valued at a certain dollar amount, depreciated, and payment is issued to you and your family. It’s designed to prevent you from going without things that you’ve always had as well as save you from being forced to pay for all new items out of your own bank account.
Replacement Cost Coverage
When it comes down to choosing a home and contents insurance policy, you’ll find the term replacement cost coverage as one of your options. This policy allows you to choose a policy that covers your belongings at face value. For example, if your television is stolen in a burglary, your insurance agency issues payment in an amount equal to the cost of a replacement television with the same features.
Actual Cash Value
This is the other option you have when choosing home and contents insurance. The actual cash value of your items is different from the replacement cost coverage. Let’s say someone takes your television. You bought it three years ago, and you spent a lot of money on it. It was the best on the market at the time, but it’s been revamped, upgraded, and replaced with televisions that have many more features, options, and upgrades in the years since. Technology has a way of changing like that. The actual cash value of your television right now is only a small fraction of what you paid for it brand new, which means your insurance payout will be substantially less than the cost of replacing the television.
Home and contents insurance is not without its limits. When choosing a policy, the best course of action you can take is to understand precisely how much your items are worth. Each home and contents policy comes with a coverage limit, but it’s not set in stone. You can increase the coverage limit if your personal belongings are more expensive. This does change the cost of the policy, but it protects the amount of money you might pay out of pocket if disaster strikes.
Another consideration to make when choosing a home and contents insurance policy is the value of specific items. Your coverage does help replace items stolen or destroyed, but there are limits to specific amounts. Some policies only replace jewelry up to a certain dollar amount if you don’t read the policy and amend the amount it protects. For example, if you can replace jewelry valued up to $25,000 after something unexpected happens but your diamond wedding ring is an antique 7-carat diamond worth $500,000, you won’t be able to replace it with the amount the policy covers. Knowing the value of specific items allows you to include those values in your insurance policy to replace them at value.
Protecting your personal property and the contents of your home isn’t something you should consider lightly. Many homeowners and renters see the dollar amounts listed in policies and assume they can absolutely replace everything they own for $20,000 or some other listed amount, but personal property adds up very quickly. It might surprise you how much money you have in your home in regards to your personal property. Just think what might happen if you have a five-bedroom home and four children and fire destroys your home with a policy that covers up to $20,000 worth of items. Can you replace the furniture in every bedroom, the toys, the dishes, the clothing, and everything else your large family has for only $20,000? These are things worth considering when choosing your personal property insurance coverage.