Home Insurance Personal Property Coverage

When purchasing home insurance policies, usually the focus is on the value of the dwelling insured rather than the remainder of the home insurance package.

However, home insurance is sold to both individuals who own the dwellings as well as those who rent a place to live.

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Renters insurance is available without covering the dwelling and the focus then is on the contents of the dwelling, although contents are a vital part of home insurance.

Ordinarily the home insurance policy provides coverage as follows:

• Building or dwelling coverage as determined by the owner of the property.
• Other structures such as fences, or separate garages as owned by the policy holder. This coverage is usually 10% of the value of the building or dwelling.
• Property coverage – the contents of the dwelling as owned by the policy holder. This coverage usually represents 50% of the value of the building or dwelling, but in cases where the building or dwelling is not owned by the policy holder, the valuation is based upon the requirements of the policy holder.
• Loss of Use –representing payment of living expenses if your place of residence becomes uninhabitable as a result of a covered peril
• Personal liability coverage – The amount needed to protect you should someone sue you for injury that you cause. The amount of coverage is set by the policy holder. Usually this coverage begins at $100,000, but should be set, dependent upon the net worth of the policy holder.
• Medical payments – The limits for this insurance begin at $500 and tops out at $5,000. The intent of this coverage is to pay for injury to individuals on the premises of your property, whether rented or owned, from occurrences that occur there. The advantage of this coverage is that the policy holder may submit the claim without threat of lawsuit.

Property (Contents) Coverage – Setting Limits

The best way to establish the limits of coverage for content coverage is a home inventory.

A home inventory checklist is available by linking to InsureUOnline for the National Association of Insurance Commissioners (NAIC). The following are reliable ways of keeping track of your contents:

• Keep sales receipts for major purchases
• In addition to the inventory list, make a video or photographic record of your inventory
• Keep a copy of the inventory in a fireproof box or a safe deposit box

Total the values of the contents to come up with the amount of insurance. If the value is higher than that on the policy, be sure to advise your insurance company.

The average home insurance policy has limits on some types of personal property.

These types of personal property should be scheduled, or listed specifically:

• Gold or silver bullion or negotiable documents have a limit of $500
• Jewelry, furs, watches, or fine arts have a limit of $500 usually
• Business, personal property related to business is limited to $2,000
• Money or bank cards with a limit of $100 for unauthorized use

For specific property, you will need to have an appraisal, verifying the value of the individual property. This should be given to the insurance company as verification of the need for additional coverage scheduled on a personal property ‘floater’.

Actual Cash Value vs. Replacement Cost Value

This is a vital aspect of content coverage. Actual cash value coverage will pay for property insured subject to reduction for wear, tear, and age. Replacement cost value pays the cost to replace the item of property.

The importance of this is illustrated by using the example of a television set. The set cost $400 to purchase, but it is ten years old.

Under actual cash value, a total loss of the set from a named peril will pay the initial cost less the depreciation for the age.

You may receive $200 for the set, considering its age. If you have replacement cost coverage, and a new television set would cost $900 to replace.

The insurance company will pay the full replacement cost less the deductible, of course.

Some items are not eligible for replacement cost coverage:

• Antiques or rare items such as fine art, paintings, collectable items, and souvenirs
• Outdated items – ones that are obsolete or no longer work. That means the old Radio Shack TRS-80 that doesn’t work in the garage would not be eligible for replacement cost coverage.

Shopping for Home Insurance

Saving money on home insurance premiums can be as simple as doing comparison-shopping for policies, just as you would any other purchase.

Knowing how to shop is important, too. Acquiring at least three different quotations or bids on home insurance from different companies is the best way to shop for both building and content coverage.

Examine Licensing of Insurance Companies and Agencies in your State

Since the individual states rather than the federal government regulate insurance, a branch of the state government oversees licensing and rating. Each state has an insurance department that licenses as well as oversees the actuarial needs of the people in the state.

Look at your state’s government website and you will find records of licensed insurance companies, agencies, and any complaints that may exist against them.

Usually, also, your state will provide consumer information appropriate to your state.

Be careful to check this since it is illegal to sell insurance without a license.

Scrutinize the Financial Records and Complaint Ratios of Insurance Companies

In the past, some insurance companies have had a history of being under capitalized so they were unable to pay claims that might arise. Furthermore, complaint ratios are gathered to assess the practices of individual insurance companies.

Linking to the following sites may access these resources:

• National Association of Insurance Commissioners (NAIC)
• A. M. Best Company – a well-known insurance rating firm
• Standard and Poor’s Rating Service

Read the ratings criteria on each site carefully so you understand it.

Provide Adequate Data to the Insurance Company

The bases of insurance ratings are varied and the companies providing quotations will need the following information and perhaps additional data:

• Construction of the house and roof, even if you only want contents coverage
• Values for building, contents, personal liability, and medical payments
• Perils you wish to insure against
• Address of the dwelling as well as square footage
• You and members of your family’s occupation
• Probably your family’s dates of birth and social security numbers
• Amount of deductible desired

Recognize that one of the bases for rates is a composite credit score reflecting the credit score you may have through credit reporting agencies. A good credit score may earn discounts on your insurance premium.

Determining Which Quotation to Accept

Ideally, all the quotations you have acquired are comparable, meaning that they are for the same type of coverage. Assess both the premium prices and the insurance companies. Sometimes a company with a higher financial rating may be worth a few extra dollars of premium if their complaint ratios are lower.

When you receive the policy, you have chosen, read it carefully to ensure that the coverage is what you requested.

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