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Contents Insurance Explained

Contents Insurance And Personal Property Coverage

Contents Insurance Explained
A slice of cake and a cup of tea in antique china. Photo source: @erol/Unsplash

Personal property coverage or content insurance safeguards the belongings inside your home – like appliances and other personal possessions. It is a coverage policy that helps homeowners replace personal items in case they get lost, damaged or stolen.

What Items Does Personal Property Coverage Cover?

The following are a list of personal belongings that could be covered under personal property coverage.  Please note this is not a standardized list as coverage policy differs significantly: 

  • Ornaments and precious stones 
  • Electronic gadgets: television, computers, video cameras.
  • Firearms
  • Furniture
  • Clothing
  • Appliances
  • Stereos
  • Televisions
  • Computers
  • Artwork
  • Rugs, window treatments, and other décor
  • Dishes
  • Wine and spirits
  • Sporting goods and toys

It is also paramount we remember that personal property policy is subject to change taking into consideration the location and the owner of the property.

What Are The Types of Personal Property Coverage?

Personal property coverege comes included in the following types of insurance policies:

Who Is Covered Under My Personal Property Insurance?

Certain individuals are covered in your personal insurance like family members. Your wife and kids are considered dependents in your insurance policy. If you are in doubt about which family member is insured, have a word with your agent.  In addition, it is important to note that roommates, guests or friends are not covered in any of your insurance policy unless named on the policy.

What Kind Of Damages Does Personal Property Insurance Protect?

As an homeowner, there are two types personal property insurance policy we must understand: 

  1. Open Peril Policy
  2. Named Peril Policy 

In the world of insurance, “peril” simply means risks,  dangers and happenings that can loss or damages. 

Open Peril Policy

Open peril policy protects your possessions from any type of perils, so long as it is not clearly excluded from your policy.

An open peril policy is usually more expensive than the named peril policy because it is more inclusive. It has more benefits compared to the named peril policy and covers more peril.  

Most times, homeowners policies usually omit coverage for the following: 

  • Tremors and hurricanes
  • Pressure from tree roots
  • Defective construction
  • Natural wear and tear
  • Erosion
  • Flooding

In other words, if your furniture was damaged as a result of flooding, you would not be covered because it has been excluded from the coverage. On the other hand, if your furniture was damaged as a result of animal attack, you would be fully compensated because it was not excluded from the coverage. 

Named Peril Policy

The named peril policy only covers damages, losses that is specifically stated in your policy. It means before you and I can file a claim, we  must make sure that the cause of damage or loss is something clearly that stated that our policy covers. 

The following are a list of some the perils usually included in an homeowner named peril policy:

If your home electronics was stolen or get damaged by fire, you and I covered because those two perils are included in the policy. 

Types of Coverages

By coverage, we mean in the event you suffer damages to property or loss to personal belongings,  how will the insurance company reimburse you ?  

There are two types of coverage for personal property:

  1. Actual cash value 
  2. Replacement cost value 

Actual Cash Value

Actual cash value coverage only provides reimbursement for your personal belongings with a deduction of depreciation. 

What does this mean ? 

It means that should item be damaged, this coverage shall only offer compensation for its replacement for the worth of the item at that period, not what it would cost to replace the item.

For example, if you bought a laptop five years ago for $2500 and it was damaged in a fire accident, you will only the amount the laptop is worth at the time of loss, not the actual cost or value of it five years ago. It means you will be getting back the depreciated value of your laptop minus the deductible amount.

Replacement Cost Value

This is the opposite of actual cash value.  It is more comprehensive and inclusive compared to an actual cash value.

Replacement cost Value provides coverage for your personal belongings without a deduction of depreciation. It means in the situation an item is damaged or lost, you getting the same amount it cost you before or the current market price.

So if your laptop that costs $2500 gets damaged and you have replacement cost value coverage, you will be getting a full $2500 back minus the deductible for the damaged laptop. 

Exceptions To Coverega Limits

It is important to note that there are exceptions to coverage limits.  For instance, high-value items like pieces of jewelry do not receive full reimbursement if the value of each piece exceeds a certain amount.  For such high-value items, I suggest you look for insurance companies which provide specific add-on coverages. These companies provide you with better coverage policies that suit your lifestyle though, they are more expensive. 

How Much Of Your Personal Items Are Covered For?

Personal property insurance covers the total value of personal and belongings you want it to cover. The best line of action is to take a comprehensive inventory of all your belongings and know the value of it each item. Then, you apply for a policy that provides suitable coverage for these items. 

How Much Does Personal Property Insurance Cost?

The fee to insure your personal belongings is added to your homeowners insurance policy unless you opt for extra protection for high-value items you own. Your home insurance firm utilizes the amount of coverage you have for your house to define how much personal property insurance to offer. It is typically a proportion of the building coverage sum. That percentage is usually between  40 to 80 percent.

Finally, here are four tips you must keep to heart when setting up a personal property coverage as a homeowner:

  1. You must do a proper evaluation of your items. Know the worth of each item.
  2. Have a sound understanding of the limitation of your coverage. 
  3. If you are a collector of antique items or vintage cards, know the value of each item and insure them separately. 
  4. Know the current ratings of your insurer. Why? This helps you know the financial standing of your insurer and whether your insurer will be able to respond to a claim three years from now. 

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