What would you do, if you suffered a catastrophic loss of your home? If you have homeowners insurance, at least the cost of replacing the home itself should be covered. That probably takes a lot of worry off of your mind. But what about the things inside the house? Obviously, you don’t want to start over from scratch when you move into your (empty) new home.
That’s why homeowners insurance policies do offer coverage for contents of the home. But don’t make the mistake of thinking that this coverage automatically replaces everything you owned prior to the catastrophic event. For one thing, you are probably subject to a coverage limit (such as $10,000, for example). When we’re talking about replacement of all furniture, household items, personal items, and so on, you can hit your limit pretty quickly.
Another problem is that your insurance company probably won’t just write you a check for the amount of your coverage. You will be asked to name items that were lost, along with their approximate values. If anything seems oddly overvalued to your insurance company, they might ask for proof of that item’s value. For example, everyone has some decorative items in their home, but most people don’t own an expensive art collection. Your homeowners insurance probably doesn’t cover such items, meaning they might require their own, separate insurance policies.
Then there’s the difference between replacement cost coverage and actual cash value coverage. Replacement cost coverage means that the insurance company will issue you the amount of money you need to purchase that item new. Actual cash value coverage only offers the depreciated value of the item. It’s important to know which type of coverage you have.
And, did you know that your homeowners insurance policy won’t cover the possessions of roommates or household employees? This isn’t a problem for most people, but keep in mind that your coverage only extends to your belongings, and those of your spouse and dependents.
Finally, your homeowners insurance policy probably won’t cover items that you use for business. So, if you store any inventory in a closet, or work from a home office, those items might not be replaced at all. Business property often requires a separate insurance policy.
It’s a good idea to walk through your home with a video camera, to record belongings that should be covered by your homeowners insurance. Store that video file in a secure place, and make sure to call us if you have questions about your coverage. We can help you decide if your belongings are adequately protected.