Image courtesy of Getty Images, Illustration by Hunter Newton/Bankrate
When you have homeowners insurance, your policy covers more than just the structure of your home. Contents insurance is usually included, which pays for damage to your belongings up to the policy’s limits if they are damaged by a covered peril, like fire. Knowing what this coverage specifically includes can help you decide how best to financially protect your belongings.
What is content coverage?
Homeowners insurance, also known as personal property insurance, covers your belongings up to the policy limits, subject to exclusions.
This means that home contents insurance covers most of the belongings you keep inside your home, including furniture, clothing, appliances, etc. Home contents insurance may also provide financial protection for items you store off the premises (up to a percentage of your policy limits) and for damages to guest belongings caused by covered perils.
In a standard home insurance policy, your belongings are covered on a named peril basis, meaning your personal possessions are only financially protected against the perils specifically listed in the home insurance policy. Typically, this includes perils such as fire, theft, and windstorm, but does not include earthquake, flood, neglect, or mold unless covered by an endorsement or separate policy.
What does home insurance cover?
Almost everything you own is covered under personal property insurance, but there are some limitations and exclusions. Here’s a summary of what’s typically included in home contents insurance:
Typically covered:
- furniture
- clothing
- Electronic devices such as televisions and computers
- Decoration
- Books
- Sports equipment, including bicycles
- cooking
- Jewelry (up to a certain amount)
- art
- Non-built-in appliances (e.g. blenders, toasters, mixers)
- Firearms
What is typically not covered:
- The value of expensive items
- Vehicles and aircraft
- Installed features like floors, furnaces, cabinets, etc. (If you own your home, your home insurance will cover this)
- Animals such as birds and fish
- Items covered under another policy (e.g. jewellery, which has its own policy)
- Tenant or lodger’s property
- Lost or misplaced items
Home contents insurance coverage limits
According to the Insurance Information Institute (Triple-I), most homeowners insurance policies include contents insurance that is between 50 and 70 percent of the home coverage listed on the policy, so if your home coverage is $300,000, you can expect your contents insurance to be in the range of $150,000 to $210,000.
If you’re a renter or condo owner, you may not need any dwelling coverage at all or as much, so you can usually choose your own home insurance limits, even though insurance companies may state minimum or maximum amounts that are required or recommended.
Creating a home inventory can help you determine if you have adequate contents coverage for your belongings.
Actual Cash Value and Replacement Value
When insuring your property, most insurance companies allow you to choose between Actual Cash Value (ACV) or Replacement Value (RCV). RCV insurance pays the cost to replace items destroyed by a covered peril with items of comparable value at current prices. ACV insurance, on the other hand, pays the depreciation value of an item, which is calculated by subtracting the item’s depreciation value (determined at the time of the loss) from its current replacement value.
RCV coverage is usually more expensive, but may be reasonable if replacing your furniture with new ones after a total loss would be a financial burden. On the other hand, if most of your furniture and appliances are relatively new or you have the funds to comfortably replace items after a loss, ACV may be sufficient. Talking to a qualified insurance agent can help you identify the best coverage option for you based on your belongings and the cost of coverage.
Valuables Sub-Limit
You’ll probably notice that the list of items covered under your home insurance policy includes some pretty pricey items. Home insurance policies usually help cover the replacement cost of items, but most policies have minimum amounts on certain types of items. For example, your policy might pay up to $1,500 to replace stolen or damaged jewelry.
Read your policy to find out what your specific coverage limits are. If your home insurance isn’t enough to cover some of your more expensive possessions, consider adding them to your policy through a rider or endorsement (additional cost). Or, you may be able to get a separate policy for them.
