Understanding What Home Contents Insurance Covers

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Contents insurance—also known as personal property insurance—can help you replace the items in your home if you have a theft, fire, or other types of insured claim or loss.

What Is Personal Property or Contents Insurance?

The personal property coverage is insurance that covers the items you have in your home. The contents of your home are made up of all the different things you own in and around your house. Personal belongings include your clothing, electronics, expensive jewelry, and essentially anything movable.

How Do You Get Insurance for Your Contents or Personal Belongings?

There are typically three ways to get insurance for your contents or personal belongings. 

  1. Home Insurance
  2. Condo or Coop Insurance
  3. Renters Insurance

All three of the above insurance policies provide some coverage for personal belongings, additional living expenses, and liability. Additionally, every policy has special limits and exclusions.  

Are Family Members Covered?

The definition of insured on an insurance policy includes dependents, like children. It also includes the spouse of the named insured. If you are unsure if a family member is included in the definition of insured on your policy, then your best bet is to contact the insurance company and ask them. Your agent or broker will be able to go over your specific circumstances and make sure you have the coverage you need.

Are Roommates Covered?

Good friends or roommates may live together in a place where only one person has an insurance policy. Roommates are not covered by an insurance policy unless they are named on it because they do not fall under the definition of the insured. Therefore, if your friend owns a house and you live in it, or you share an apartment, and you are not a named insured on their insurance policy for personal belongings, then you are not covered for your things. You would need a renter's policy to cover you or ask to be added to their policy as a named insured to share the policy coverage.

Are a Guest's Personal Belongings Covered?

Although the personal property belonging to a roommate would not be covered on your contents, renters, or home insurance policy, the personal property of others while in your care may be covered. 

Are Contents Covered When Moving?

What will happens if your personal belongings are damaged or stolen during a move? Your contents insurance may cover you while you are moving for certain risks. However, many exclusions can apply, and coverage is limited to specific situations depending on the type of insurance you have. It is important to ask your insurance broker or representative what is covered during a move to find out if you have the coverage you are interested in or not.

Are Personal Belongings Covered by Insurance on Vacation?

Your contents insurance will typically cover you for your personal property while temporarily removed from your premises in your possession, worldwide. For example, if you go on vacation, you will have some of your possessions with you. If something should happen to personal items, your contents insurance could cover you just as if you were at home. Insured items would be subject to the same coverage provisions in your policy, including the deductible.

What Kinds of Coverage Are Available for Contents?

Whether you have a homeowner policy, condo, or renter policy, the way the personal belongings are covered will be based on the same principals:

How Much Are Personal Belongings Insured For?

For condos and renters, you decide the amount of insurance you need for your contents, and the premium for the policy is based on the amount you provided.

For home insurance, the contents or personal property limit is usually a percentage of the insured dwelling amount—typically 70% of the insured dwelling value. In some circumstances, it may be increased or decreased if needed depending on your situation.

You aren't usually charged for the contents when it is part of the home policy. It is just a part of the insurance package when insuring your building, just like additional structures are.

Actual Cash Value vs. Replacement Cost Coverage on Your Contents

Whether you have replacement cost or actual cash value coverage will determine how much you will be paid in a claim. 

Replacement cost coverage on contents means that the insurance company may repair or replace the item in the event of a loss. If you had to replace the item, you would receive the amount of money required to buy a new item.

Actual cash value coverage means that you are covered for the value of the item less depreciation. This coverage defines a very limited form of protection. Make sure and ask your insurance agent or broker what the basis of claims settlement is on your insurance coverage for your personal belongings. If it is actual cash value, you may want to ask for a quote for replacement cost insurance.

What Is the Least Expensive Type of Contents Insurance?

Actual cash value coverage is less expensive than replacement cost coverage because it pays you less in a claim.

Named perils content insurance is also less expensive than an open perils policy because named perils only cover you for the specified risks on the policy such as fire, smoke, lightning, vandalism, theft, and other items listed on your policy. You will only have coverage for the listed risks.

Make sure and ask about how your contents are covered in the policy you have. Cheaper is not always better when you look at your insurance, so choose the right insurance for you. If you are trying to save now, imagine how difficult it will be to claim if you can't get paid because you are not covered, or if you only get half the value of your property.

Business Property

A contents insurance policy is meant to cover your personal belongings. If you work from home or have the equipment or business-related stock items, your coverage may be limited. Make sure and inquire about these items specifically, so you know if you need to add coverage, or if it is already included.

Deductibles on Your Personal Property

The deductible represents the portion of a claim that you will pay for yourself. If you take a higher deductible to save money on insurance, then even though your contents are covered on a policy, you may not be able to make smaller claims because the value of the claim may not be worth it.

Adding Insurance Rider Coverage for Contents or High-Value Items

We've gone over what is covered by contents insurance and some circumstances where people's property may or may not be covered. There is one more area of personal belongings insurance where you may need more information. That area is covering high valued items or items that may not be easily replaced. 

Your insurance policy may offer you the option of adding coverage for special items of high value, like jewelry. If you have items like antiques or special collections, jewelry, or even musical or sports equipment (like a bicycle), you may want to add a rider to the policy to make sure you are covered.

High-Value Insurance for Personal Property

Finally, there is one other option for contents and personal property insurance that you may be interested in if you feel that the value of your possessions is exceptionally high. There are high-end insurance policies that will have higher special limits, fewer exclusions, and better claims settlement options, such as no obligation to replace policies. 

High-Value specialist insurance companies will provide you with policies that may be a little more expensive but may offer coverage that suits your lifestyle better.

The Bottom Line

Whether you own a home or rent an apartment, there are many affordable options to insure your personal property. When purchasing a policy, consider discussing any special items that may require a rider, and ask about policy limitations. If you are trying to save money, consider increasing your deductible and when comparing policy options, don't forget to check the basis of claims settlement (Actual Cash Value or Replacement Cost).

Article Sources

  1. Insurance Information Institute. "What is Covered by Standard Homeowner's Insurance?" Accessed June 30, 2020.

  2. Insurance Information Institute. "Are There Different Types of Policies?" Accessed June 30, 2020.

  3. Insurance Information Institute. "Renters Insurance." Accessed June 30, 2020.

  4. Insurance Information Institute. "Homeowners 3: Special Form." Page 1-3. Accessed June 30, 2020.

  5. American Family. "Can I Add My Roommate to My Renters Insurance." Accessed June 30, 2020.

  6. Insurance Information Institute. "Getting the Right Insurance Coverage for Moving." Accessed June 30, 2020.

  7. NAIC. "A Shopping Tool for Homeowners Insurance." Page 8-11. Accessed June 30, 2020.