Aug 10
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Home Content Insurance and The Homeowners’ Insurance Policy
The amount of home content insurance needed by an individual or family differs greatly from one person to another. How a person’s possessions are insured also depends on whether or not the residence is owned or leased (rented). There are two personal insurance policies available to provide home content insurance: The Homeowners’ policy and the Renters policy. We will examine the Homeowners’ Insurance policy:
How Much Home Content Insurance is Provided by the Homeowners Insurance Policy?
The standard Homeowners’ insurance policy are written to include coverage for personal belongings up to 10% of the building value. So if a home is insured for $200,000, there is automatically $20,000 in insurance for personal belongings within the home. For many, $20,000 would not nearly be enough home content insurance. It depends greatly on the age and replacement cost of the items owned by the insured. The insured can increase the amount of insurance for home contents for an additional premium.
How Are Contents Insured by Homeowners’ Insurance
Types of Losses Covered for Home Contents
Most Homeowners insurance policies provide coverage for personal belongings for “Named Perils” only. The named perils include such types of losses such as Fire, Lightning, Theft, and Vandalism. This is significant because most home insurance policies provide much broader coverage for the structure itself. As such , some homeowners assume that their belongings are insured under the same terms, which is not the case.
Settlement Valuation
How contents are valued after a loss is also different between the structure of the home and the contents within it. Contents claims are settled at Actual Cash Value (Depreciated for Age) rather than at Replacement Cost. Some Homeowners’ insurance companies do offer endorsements to broaden that coverage to Replacement Cost as well. When deciding how much Home Content Insurance is needed, consider the age and overall condition of the items. Over-insuring for home contents is an expensive mistake.
Where are Contents Insured under Homeowners Insurance
The Homeowners policy does provide some automatic coverage for items while not located at the home. This is relevant for people while traveling or students heading off to college. The amount of insurance automatically provided is 10% of the contents amount. Consider our previous example: A home is insured for $200,000. Therefore the contents limit is $20,000. Finally, the amount of coverage for property off premises is $2,000. Coverage is typically provided worldwide.
Other Considerations for Home Content Insurance
All homeowners’ insurance policies do include limitations for certain high value items which are better insured under their own insurance policy. These items include insurance for jewelry, furs, coin collections, and watercraft. If jewelry insurance or insurance for high value items is needed, the Personal Articles Floater policy offers better coverage. Condominium owners also need to address building insurance and condo loss assessment coverage.
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