Homeowner’s insurance policies are based on the value of the structure. It’s quite simple to determine what the amount should be for the house, but how do you know if you have sufficient coverage on your personal property? Here are some tips to make sure your assets are properly protected by your insurance policy.
Know your coverage
You need to know you have sufficient coverage. Most insurance companies determine the personal property (possessions, belongings, or contents) coverage based on a percentage of the amount for which your house is covered. This percentage typically ranges between 50% and 75%. So, if you have a home insured for $200,000, and you have contents coverage at 50% of your structure value, you would be insured for up to $100,000 for all of your personal property.
That sounds like a lot, but don’t think about what it’s worth today, think about what it would cost to replace each item. Is this coverage enough? Think about your sofa that might be 4 years old. You’d normally say, “That’s not worth anything.” It might not be at a garage sale, but what would you have to pay to replace it? Always think in terms of replacement, because those are the funds you’ll need to get back to where you were before the loss. Consider what you own in electronics, furniture, appliances, decorative items… the list goes on and can add up quickly.
Have a home inventory
The best way to know what your insurance coverage amount should be is to have a home inventory. By listing all of your personal property, you’ll have a much better idea of your coverage requirements. Don’t forget the garage, out buildings, closets, and the attic. This seems like a long, detailed process. It is, but well worth it. If you don’t want to do it yourself, there are many certified home and business inventory companies who will do it for you.
Know your policy limits
Another key point to ensure your assets are protected is to know what your policy limits are. Homeowners policies have limits for certain items such as jewelry, collectibles, weapons, and silver. These limits are normally far below what you’ll need to recover properly. For example, some policies have a limit of $3,000 for jewelry, and many policies are much lower than that amount. Without a rider, no matter how much your policy coverage is, these items are restricted to the amount of the limit. These special categories of personal property are where many people I know have lost more than $50,000 because they didn’t know they needed a rider.
Protect your assets by understanding your policy, how the amount is determined, and have an inventory to determine if your coverage is sufficient and what items will need riders.