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How does home contents coverage work?
Home contents insurance is coverage that protects your personal belongings. The exact specifications of your home contents coverage depend on your policy details, but it generally covers your personal belongings up to your coverage limits in the case of their damage or destruction via a covered loss.
Let’s explore the ins and outs of home contents insurance to ensure your personal property is protected.
First, a note: most property policies do not cover personal property separately. It’s unlikely you will find an insurance policy to cover just your personal belongings. Your renters, homeowners, or condo policy may cover for your liability insurance and your personal property (contents). If you want insurance coverage for your personal property alone, invest in a renters policy (or home or condo).
Your contents coverage applies to everything you own that resides within the walls of your home or apartment — your clothes, TV and other electronics, furniture, appliances, and so on. What circumstances they are covered against depends on the specifics of your policy.
If your property is damaged by any of the hazards listed above, you would have coverage up to your policy limits. It is called a named peril policy because all the perils (causes of loss) are specifically listed on your policy.
Another type of coverage for personal property is known as an open peril policy. Here, all the perils that won’t be covered are specifically listed. This coverage is more robust: you only need to prove the excluded perils did not cause the damage.
In an open peril policy, the following hazards are excluded from coverage:
For particularly valuable items, such as jewelry and fine art, most companies will restrict the total amount of compensation. Below are the common sub-limits you can expect.
Money, gold, coins
Jewelry, watches, furs
If you have any item that exceeds the limitations listed above, consider an endorsement. An endorsement exceeds the coverage limit in order to protect a specific kind of property. For example, a jewelry endorsement would raise your coverage limit for all your jewelry. If you have one piece of jewelry that is valuable, such as an engagement ring, you might want to consider a scheduled endorsement. This would require an item-by-item appraisal, but is the best way to protect your assets.
Home appliances are considered personal property when it comes to insurance coverage designations, so they fall under what home contents insurance will cover. As long as your appliance was damaged or destroyed because of a covered peril listed on the policy, insurance will take care of its repair or replacement — the circumstances surrounding the damage sustained by your appliance matters to your insurance company, so it's best to be armed with proof of the peril that caused its state should your insurer inquire.
What appliances will be covered may vary from insurer to insurer, so confirm with your insurance company which appliances are eligible for coverage. Things that plug-in to an outlet, like a refrigerator or washing machine, are examples of appliances that should be covered. However, appliances that are built-in to your home, like a hot water heater, could be covered by the dwelling portion of your homeowners insurance policy instead.
Wear-and-tear and maintenance and operational issues related to the age of an appliance are never covered by insurance.
Certain perils will never be covered by insurance companies — regardless if it’s a named or open peril policy. If your contents are damaged or destroyed by the following perils, you will not have insurance coverage:
*You can add flood/hurricane coverage back to your contents by purchasing a flood insurance policy through FEMA and the National Flood Insurance Policy. This will cover your personal property contents up to $100,000. If the value of your contents exceeds this, consider purchasing another private flood insurance.
**You can add limited coverage for mold on many standard property insurance policies.
Furthermore, because we’re discussing a contents policy, you will have no coverage for your liability, physical structure of your dwelling, your additional living expenses, or your medical payments to others. These coverages are standard in a home or renters policy.
While it can vary, you generally have some flexibility for your personal property coverage limit. Typical renters policies will default to $10,000 to $25,000 in personal property coverage. If you are sharing your renter’s policy with a roommate, you might elect to increase this coverage.
On a homeowners policy, your property personal coverage can default to a percentage of dwelling coverage — usually between 50 and 70% of your dwelling amount. If your dwelling amount is $250,000, your personal property coverage may range from $125,000 to $187,500.
The standard contents policy will reimburse you for your belongings on an actual cash value basis. Actual cash value, or ACV, means you are reimbursed for what your belongings are currently worth — not what you originally paid for. Replacement cost, on the other hand, will reimburse you based on what it would cost to replace your belongings at the original market value.
If you’re able to, we recommend insuring your personal property contents on a replacement cost basis. While it does increase your premium, you are better compensated for your damaged belongings.
If you want your contents covered, we recommend you look for renters, homeowners, or a condo insurance policy. This will not only protect your belongings, but your liability, the structure of your home, and other coverage options not available just for your contents. For more information on these policies and why you need them, see below.
As you’re shopping for your content insurance, we recommend the following: