Contents Insurance
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Contents insurance offers financial cover against loss or damage to one’s personal belongings insured under a policy agreement. It is an optional cover that can be bought as part of a comprehensive home insurance policy or as a separate product. However, with the ever-increasing threats of burglary and fire, buying affordable contents insurance is prudent to mitigate the risk of financial loss.
Contents insurance offers financial cover against loss or damage to one’s personal belongings insured under a policy agreement. It is an optional cover that can be bought as part of a comprehensive home insurance policy or as a separate product. However, with the ever-increasing threats of burglary and fire, buying affordable contents insurance is prudent to mitigate the risk of financial loss.
Table of Contents
Scope of Coverage
Contents insurance offers cover against loss or damage to movables and immovable items that are not fixed, such as electronics, furniture, clothing and decorative items. The policy covers several perils, including:
- Fire
- Theft
- Vandalism
- Explosions
However, natural disasters, such as earthquake and floods, might not be covered under the policy. This varies among the different insurance companies. Contents insurance also covers legal liability against damage or loss to a third party due to mishandling of the insured contents within the premises.
A standard contents insurance policy offers indemnity plans. Here, the insurance company replaces lost or damaged insured products with another one of similar characteristics. For example, a seven-year-old refrigerator will be replaced with another refrigerator that has been in use for seven years. However, one can always buy a contents insurance policy that provides new-for-old replacement. An individual can also insure household items that s/he carries with him/her and are not placed at home permanently, such as vehicles, mobile phones and laptops.
Not every insurance policy covers jewelry under the standard contents list. Most companies require an individual to buy a separate insurance policy for expensive belongings, such as gold or jewelry.
While buying a contents insurance policy, one has to prepare an inventory of items to be included in the list. For this purpose, an individual should have a clear understanding of all the items that need to be covered under the policy and those that can be excluded. Contact an insurance company’s agent or broker to get information about the coverage.
Filter out items that need insurance cover to build the list. Every essential and costly item should make it to the list. However, more items on the list will mean higher premiums. So, include only the most essential or irreplaceable items in the contents insurance list.
[break]Types of Home and Contents Insurance
A homeowner can choose from the following home and contents insurance policies:
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HO-1: This is a homeowner’s policy with limited scope of coverage. It provides financial cover against 11 perils, such as theft, fire, vandalism, hailstorm, glass breakage, volcanic eruption, smoke and personal liability. Floods and earthquakes are listed in the exceptions for the policy. The policy offers limited cover for home contents.
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HO-2: This homeowners’ insurance policy offers broader coverage, including several additional perils. This policy specifically list perils that would be covered. Some insurance companies offer a modified version of the HO-2 policy for mobile homes.
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HO-3: This home and contents insurance policy offers maximum coverage under homeowners’ insurance with an ‘all-risks inclusive’ tag. The policy covers loss or damage due to all perils except those specifically excluded under the policy.
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HO-8: This is a specially-designed policy for older homes. The policy reimburses for damage or loss due to insured perils on an actual cash value basis. The reimbursement amount is calculated by the existing cost of replacement after deducting depreciation. Although some policies with higher premium may offer full replacement value, many older home cannot qualify for this deal.
Home and contents insurance policies for renters include:
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HO-4: Designed specifically to suit the insurance needs of renters, this policy covers contents and personal belongings of the renter. It also provides cover for structural areas of the home that is owned by the renter, such as kitchen installments.
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HO-6: This home and contents insurance policy specifically determines the perils covered. It provides good coverage for personal belongings and structural areas that belong to the policyholder.
For condo owners, insurance companies offer a separate insurance policy with multiple benefits.
No home and contents insurance policy covers loss or damage due to the homeowner’s negligence or lack of maintenance. If the enquiry states any of the two reasons for loss or damage, the claim application will be rejected.
[break]How to Select an Insurance Company For Home and Contents Insurance
The following tips may help you select the best insurance company for house and contents insurance policy:
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Licensing: Buy your home and contents insurance policy from a company that is licensed to operate in your area. A licensed company receives aid from the state insurance department in case of financial misfortune. Also, licensed companies do not enter into fraud plays due to government oversight.
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Financial standing: Check the financial solidity of the insurance company through the Internet. Only a financially sound company will be able repay the claim amount for the house and contents insurance policy. Several financial services rate insurance companies based on their monetary performance. These ratings are easily available online.
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Price war: Several insurance companies offer house and contents insurance with different price tags. Thus, it helps to receive insurance quotes from different companies along with the policy details. One can also search the Internet for insurance quotes. Compare rates in terms of scope of coverage and insurance company status. Also, check for deductibles, co-payments and exclusions under the policy. Thorough analysis will help you make a prudent decision.
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Services: Visit the insurance company’s offices to get detailed information about their consumer services. The insurance company should have a hotline number or online consumer query resolution center for emergency services. If possible, contact other customers of the insurance company to get a review of their services. Check the claim settlement database of the company available on the Internet. One can also confirm claim services for a particular company from the regional insurance department.
With several options available for buying house and contents insurance, making a choice is difficult. Buy your policy from an established company with sound financial standing to ensure that your claims are settled without any hassles.
[break]Home Contents Insurance: How to Prepare Inventory
The most important consideration while preparing an inventory for home contents insurance is that every useful or expensive item should make it to the list. For people who have just started a home, making an inventory might be easier. Lesser household items bring lesser problems. However, for people living in the same house for several years, inventory making can be a daunting task. Here are a few tips for developing a detailed inventory for home contents insurance:
- Begin the inventory by listing easily visible possessions, such as refrigerator, washing machine and television. Also, record the serial number of the electronic appliances, provided at the bottom or back of the appliance.
- Make a serialized list of each item with their make, model and brief description. Clip receipts of purchase, repair and sales related to the item, if available.
- List expensive items, such as jewelry or gold items. Although most home contents insurance policies do not cover jewelry, one can always pay higher premiums to insure them under the policy. The price tag of gold-related products must have soared since the time of purchase. Therefore, you will need to get your jewelry re-evaluated to know their current price.
- For clothes, one has to count the number of items per category, such as pants and shirts. Try to remember old purchases. Also, list items kept in drawers and closets.
- You can also photograph useful or expensive items and keep as record for the inventory for future reference. You could also make a video recording of all the belongings and describe the contents through audio.
- Use computer applications, such as MS-Excel, to prepare a soft copy of the inventory.
This inventory has to be attached with the insurance application to get cover for all the listed items. The more the number of items, the higher will be the premium. So, ensure that you only include the most essential or irreplaceable items to get an affordable home contents insurance policy.
[break]Buildings and Contents Insurance Coverage
Building insurance covers:
- Loss or damage to the building due to fire, storms, falling trees, theft, malicious activities and vandalism
- Loss or damage due to subsidence or landslip
- Leakage of liquids, such as water or oils
- Accidental breakage of sanitary wares or glass fittings
- Damage to the cables or underground pipes used to serve the building
- Cost of alternative accommodation in case major repair is required due to an insured event, such as fire.
Contents insurance covers:
- High risk belongings, such as computers, laptops, cameras and other artifacts
- Business equipments in the building, such as fax machines, printers and official instruments
- Credit card loss in case of an insured event
- Trees or plants in the garden or building lawn
- Contents in the parking area or outbuilding
- Personal cash money in the home
- Replacement of safety locks, in case the keys are stolen
Buildings and Contents Insurance: How Premium is Determined
Insurance companies consider the following factors to determine the policy premium for buildings and contents insurance:
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Amount of cover: The more an individual is insured for, the higher will be the premium. Also, the list of contents insured under the policy will affect the premium. With more expensive items on the list, the policy premium could skyrocket.
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Personal details: An individual’s personal, professional and financial details also determine the premium. First time buildings and contents insurance buyers will be charged higher. Insurance companies also review an individual’s insurance history for claims filed over the past several years.
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Locality: If the building is in a safe neighborhood with security guards, fire extinguishers and other safety devices, the premium is usually lower.
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Safety fittings: With high-quality locks and electronic surveillance systems installed, one can expect to pay lower premiums.
Buildings and contents insurance has several exceptions. The most prominent exceptions include damage caused by earthquake, floods or poor maintenance of the building.
