Think about the items you have in your home – furniture, electronics, appliances, clothes, and jewelry. Now think of how hard it would be to replace those items if they were lost. Whether you’re a homeowner or renter, you should have personal property insurance to cover damages you receive to your property after a fire, theft, or other catastrophic event.
Actual Cash Value vs. Replacement Cost Coverage
When you choose personal property insurance, you’ll have to choose between actual cash value coverage and replacement cost coverage. Actual cash value coverage will pay for your items based on their depreciated value or the cost of a comparable used item. Replacement cost coverage, on the other hand, covers your items for what it would cost to purchase them brand new. Take a television for example, that you purchased three years ago for $1,000. Actual cash value coverage might reimburse you $600 for the television, while replacement cost coverage would give you $1,000.
Maximum Coverage Limits
Some homeowners insurance policies automatically include personal property insurance up to a certain percentage of the home’s insured amount. For example, if your home is insured for $300,000, your personal property might be insured for 50% or $150,000. You may be able to lower your insurance premium by lowering your coverage amount. But, make sure you don’t go too low. You should base your coverage limit on the cost to replace your property based on today’s prices. Since replacement properties change, you may need to renew your coverage limits periodically as your household items depreciate and as you accrue more property.
Insuring Valuable Items
Many insurance companies allow you to add an endorsement to your policy to cover high value items whose replacement coverage might be limited under the standard policy. For example, your policy might limit the reimbursement for jewelry to $1,000 per item. So, if you lost a piece of jewelry worth at $3,000, the standard policy would not cover it completely. To provide maximum protection, your insurance agent may be able to itemize that particular piece of jewelry or other valuable goods.
Personal Property Insurance Exclusions
Your personal property insurance policy may have some exclusions. For example, some items, like antique, rare, or outdated items might not be insurable at all. Illegal items are typically not covered. Coverage may not be extended to personal property that’s in storage or in transit.
Your items may only be insured in certain types of losses:
- Forced Entry Theft
It may cost more to insure your items in a weather related event like a tornado, flood, or hurricane.
Take Inventory of Your Items
Though it’s a tedious process, it’s a good idea to know what things you have inside your home. This will make it a lot easier and faster to have a claim processed. You might come up with a list of each room in your home and the contents in each. Taking pictures of the items in each room could decrease the amount of work you have to do. Write down the
model, serial numbers, and any other identifying information about the items you have in your home. It’s a lot easier to make this list while you still have the things in your home rather than try to remember once they’ve been lost.
Making a Claim
When something has happened to your personal items, contact your insurance agent as soon as possible to submit a claim. Your policy may have a limit on the amount of time you can make a claim. Calling early ensures you receive coverage for your lost items.
You make be subject to a deductible. That’s the amount you have to pay before the insurance company’s coverage begins. If the value of the loss is less than the deductible, you might consider replacing the item yourself rather than making a claim. Often, your insurance premiums increase after you make an insurance claim.