You probably know that homeowners insurance protects your house from certain perils such as fire, wind, hail, and burglary. But did you know that standard policies also typically protect the possessions inside your house? That part of your policy is called contents coverage.
But there are some things you need to know about contents coverage. First, it has a limit, which is tied to the amount of dwelling coverage you have. Dwelling coverage is the part of your policy that would repair or replace the structure of your house if it was damaged or destroyed by a covered peril; your coverage limit for dwelling coverage should equal the amount it would take to rebuild the home completely.
Your contents coverage limit is set as a percentage – typically 50-70% – of that replacement cost. So if it would take $200,000 to rebuild your home, you could have between $100,000 and $140,000 of contents coverage. Sounds good, doesn't it?
Unfortunately, there can be a catch. Some policies also limit payouts for replacing high-value items such as furs, jewelry, artwork, and collectibles, and these 'sublimits' often can be quite low. For example, some policies limit jewelry payouts to as little as $1,000.
So what's a homeowner to do? Luckily, there are some ways to make sure you've got enough coverage for your 'stuff' in general and your valuables in particular.
Take inventory
Compile a home inventory – a master list of your possessions and their value. It should include photos, receipts where possible, estimates of value when you don't have a receipt, serial numbers, and a reckoning of when and where you bought each item. Make several copies – including a digital one – and store them in various locations inside and outside the home.
A home inventory serves several purposes. First, it will give you a ready-made list should you suffer a loss, which could speed the claims process. Second, it will provide a rough estimate of the value of your home's contents, which will give you an idea if you have enough contents coverage in general. Finally, it will give you a way to check your high-value items against your policy sublimits.
Schedule an endorsement
The easiest way to cover jewelry or other items that exceed your sublimits is to schedule an endorsement. This extends your contents coverage with your existing provider to match the value of your possessions.
Doing so allows you to keep your coverage with one provider. It also usually is the least costly way to make sure your best 'stuff' is adequately covered for the same perils as the rest of the house.
Purchase a personal articles floater
The other main option for covering high-value possessions is to buy a personal articles floater – a separate insurance policy, usually from a company that specializes in such coverage. Yes, it will cost more, but it comes with some advantages as well.
For one, personal articles floaters typically don't require deductibles – the amount of a claim the policyholder agrees to pay toward a loss. The policies also can offer broader coverage – artwork, for example, often can be covered in storage or in transit to a private or public showing. Jewelry can be covered for accidental loss – say you dropped your grandmother's antique engagement ring down a drain – in addition to the perils covered by standard home insurance policies.
Regardless of which option you select, your provider likely will require you to have an appraisal of your high-value items to determine their exact value. Items such as artwork, where value can fluctuate greatly from year to year, should probably be appraised annually. That means you'll also need to evaluate your coverage when the value changes substantially.
Understanding how your home insurance works is key in making sure your house and possessions are covered the way you want. The time to do that is before disaster strikes. Peace of mind carries a value higher than even the most expensive of your treasures.
Carrie Wiley writes for HomeInsurance.com, an online insurance resource for homeowners and drivers across the country. Offering comparative homeowners and automobile insurance rates, consumers rely on HomeInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeInsurance.com blog provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.
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