Homeowner's Insurance, Part 2: Contents Coverage


Homeowner's Insurance, Part 2: Contents CoverageWhile we covered the basics of homeowner's insurance last week, now we'll take a closer look at the contents portion of insurance policies, also known as Coverage C. This part of your policy applies to the contents of your home and can help to replace or repair those items if they are stolen or damaged due to any of the named perils that apply to your overall policy. But just because your homeowner's policy includes contents coverage doesn't mean you simply need to sign on the dotted line. You should take steps to make sure your coverage will truly be effective should the contents of your home and especially your most valued and important possessions be stolen, damaged, or vandalized.

What's the value of your home's contents?

The first step towards getting an accurate picture of how much coverage you need is to evaluate your home's contents, room by room, and to create a home inventory. According to the Insurance Information Institute, only 49 percent of homeowners take the time to complete this critical step. Take photos or videos and do your research until you can estimate the worth of your basic possessions. In addition, make note of any valuables, antiques, artwork, or expensive equipment and have them professionally appraised if necessary.

How should I choose a coverage limit?

A standard homeowner's policy will reimburse you for stolen or damaged items up to a certain amount, but with your newly created home inventory in hand, you can make sure your coverage limit actually reflects the value of what's in your home.

What's the difference between replacement value and actual cash value?

When it comes to contents coverage and even the coverage of your home itself, replacement value versus actual cost is an important concept to understand. Basically, replacement value means that you get reimbursed for what it will actually cost you to replace that item, while actual cash value means you only get reimbursed for what the item is currently worth. For example, if you rely on a laptop for your livelihood and it gets stolen or damaged, if you have replacement value coverage you can simply buy a new, comparable laptop; while actual cash value would only cover the cost of your depreciated laptop. There's no right choice, but you should think carefully about which type of coverage makes the most sense for you.

What is a "floater policy" and when should I get one?

Your homeowner's insurance will cover valuables like jewelry and artwork, but only up to a certain amount. If you have done an accurate inventory of your home's contents and raised your coverage limits to accommodate those items, that may be all you need. But if increasing your coverage limits doesn't cut it when it comes to your most precious valuables, you might want to look into a "floater policy". This type of policy will give you more comprehensive coverage for specific items and can sometimes include named perils that are not in your regular homeowner's policy.

For any home insurance questions, call or contact Executive Insurance & Financial Services today.

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