When you buy homeowners insurance, your plan will include possessions or contents coverage. This is the part of your policy that applies to belongings within the home. Therefore, if something were to damage or destroy them, then you can file a claim on your policy for compensation to help you repair or replace the items.
What every homeowner must realize, however, is that all home insurance policies differ. After all, everyone owns different possessions. So, why shouldn’t you be able to customize your contents insurance to your advantage? Still, to customize your plan, you will have to dig into the details. This will mean recognizing important terms in your policy that could decide whether you qualify for a claim, and how much the plan will pay you.
Let’s take a closer look at the important insurance terms that your contents coverage might include. Once you understand them, you will know how to address them when you see them.
A covered peril is a hazard that might damage your possessions, but that your insurance will pay for. For example, perils often covered by possessions insurance are fires, severe weather, vandalism, theft and other unexpected, unavoidable events. So, if a fire damages your kitchen, your possessions coverage can help you replace the appliances and other possessions within.
Your coverage limit is the maximum amount of money that your possessions insurance will pay for a single claim. You will need to choose this limit carefully, and base it on the cumulative values of important belongings like furniture, electronics, clothing, jewelry, appliances, dish wares and related household essentials. Having a household appraisal can help you do so.
A deductible is a value of a claim that you agree to pay yourself before your insurer pays for your damage. For example, your insurer might estimate that your possessions sustained $4,000 worth of covered damage when a tree fell through your living room. If you have a $1,000 deductible, however, then your insurer will pay only for $3,000 of your damage costs. The first $1,000 you must pay yourself. Any claim that falls below your deductible value will not qualify for an insurance payout.
Actual Cash Value
Some possessions policies calculate the value of a damaged item using actual cash value appraisals. This means that they will pay for an item based on its used value at the time of the loss. So, if your refrigerator cost $800 when it was brand new, then it might only be worth $400 at the time a loss occurs. Therefore, your plan will pay you based on the $400 value rather than the brand-new value.
Replacement Cost Value
If you wanted your possessions insurance to pay for an item based on its like-new value, then you should ask your agent if you can upgrade to a replacement cost value policy. With this coverage, you will receive compensation based on the value of a like-new item. This will reduce your cost burden for possessions’ replacements, but deductibles will still apply.
Scheduled Items Riders
Certain very expensive possessions might not have adequate coverage even with a high possessions insurance limit. For example, heirloom jewelry, antiques, musical instruments and artwork might all be uninsurable under your standard policy terms. To cover these items separately, you can buy a scheduled items rider. Each rider will apply to a single important piece will insure it adequately for its value. You might need several scheduled items riders to round out your plan.
An exclusion might be an item that your home insurance will not cover, or it might be a peril that will not have coverage. For example, most home insurance coverage will not cover floods (except for burst pipes). You will have to buy a flood policy separately to achieve this coverage.
To learn more about the terms that will influence your policy, speak to your home insurance agent. We are experts in all lines of home insurance, and we guarantee every customer that we will look out for their best interests when putting their coverage together.