Whether you rent or own a place, you likely have many personal belongings throughout your place to help make it feel like home. But to protect your belongings against common risks like theft, damage, or vandalism, you need what’s known as content insurance. This insurance is essential for both homeowners and renters. It ensures your belongings are covered if something happens to them.
Content insurance explained
Contents insurance is part of your home insurance policy that covers your personal belongings, known as contents. It provides financial help if your items are damaged, destroyed, or stolen. This includes everything in your home, garage, and backyard shed.
Contents insurance varies depending on whether you own a house, condo, or townhouse or rent any of these types of homes, but its main purpose is to pay for the repair or replacement of your damaged or lost items. A typical contents insurance policy covers many risks like:
- Fire
- Smoke
- Water damage
- Theft
- Vandalism
- Windstorms
- Hailstorms
- Falling objects
Depending on where you live, you might also add coverage for earthquakes or overland flooding. All policies have a maximum limit and additional limits for specific high-value items like antiques, instruments, jewellery, and cash. If you have valuable items, you can buy extra coverage for added protection or ask about a high-value home insurance policy.
What does contents insurance cover?
Some of the items typically covered under contents insurance include:
- Furniture
- Clothing
- Appliances
- Jewellery
- Electronics
- Home décor
- Bicycles
- Instruments
- Sports equipment
As we mentioned, standard content insurance policies have limits and exceptions for certain categories, so you should discuss these with your broker for home insurance to ensure you have the coverage you need.
One thing to keep in mind is that contents insurance usually doesn’t cover vehicles, including but not limited to motorcycles, four-wheelers, side-by-side ATVs and more, even if they are parked in your garage. However, if items like a computer or sports equipment are stolen from your car, they would be covered under your contents insurance policy, even if the theft doesn’t happen at your home.
Types of contents insurance coverage
How much money you get from an insurance claim depends on your policy details. It’s essential to understand the difference between guaranteed replacement cost and actual cash value so you’ll know how you’ll be covered in the event of a contents insurance claim.
Actual cash value (ACV) and replacement cost are two ways to value items in insurance. ACV is the amount needed to replace or repair an item minus depreciation. Replacement cost is the amount needed to replace an item with a new one. This works for both home insurance and tenant insurance. We will explore further below:
Guaranteed replacement cost
The replacement cost is the amount the insurance company would charge to replace your belongings if they were stolen or damaged. Replacement cost gives you money to replace lost or damaged items with new or comparable products.
The advantage of replacement cost insurance is that it provides the full amount needed to replace your belongings. You can be sure that when an item needs to be replaced, you’ll get enough money to buy a new one, even if the item’s value has depreciated. However, this type of insurance comes with a higher premium than actual cash-value coverage.
Actual cash value
Actual cash value (ACV) is the price an item would sell for today. In insurance, this means you won’t get enough money to buy a brand-new version of the lost or damaged item. Instead, you’ll get the item’s current value, which has likely depreciated since you bought it.
For example, if your 5-year-old TV is damaged by a leak, you’ll be compensated for the current resale value of a similar used TV. So, with ACV coverage, which considers depreciation based on age and condition, you might have to pay the difference between the insurance payout and the replacement cost yourself.
Because insurance companies won’t have to pay out as much for your belongings in the event of a claim, this type of contents insurance coverage is generally more affordable than replacement costs. However, keep in mind that if you do have to make a claim, you’ll likely be paying out of your own pocket to cover the difference for new belongings.
What factors affect the cost of contents insurance?
The cost of contents insurance depends on the items you insure. Because there are many ways to customize contents insurance, getting a quote from an insurance company or insurance broker is the best way to find out how much a policy will cost. Each insurance company calculates this differently. Factors that can affect the cost of your contents insurance include:
- The type of home insurance you have
- Where you’re located
- What your coverage limit is
- Whether you choose replacement cost or actual cash value
- Your insurance deductible
- If you need additional coverage for high-value items
- Any exclusions on your policy
Basically, the premium for contents insurance varies based on your policy type and coverage limits. For renters, it is included in tenant insurance. For cottage or vacation property owners, it is part of their vacation property & cottage insurance.
How your home insurance affects your contents coverage
Three types of home insurance policies—named perils, broad and comprehensive —can affect the level of coverage for your belongings. Continue reading to learn about the impact of home insurance on contents coverage:
Named perils
Named perils home insurance only covers the “perils” (or risks) listed in your home insurance or homeowners insurance policy. For example, it might cover fire, theft, explosions, falling objects, lightning, and smoke. You get to choose which risks you want protection from. However, any risk not listed in your policy will not be covered. For example, if your policy covers fire and theft but not explosions, you won’t be covered if a gas leak causes your home to explode.
With named perils home insurance, you can choose specific items or contents to be covered by specific perils. For instance, if you cover your electronics against theft, but a burglar also steals furniture, appliances, and clothing, your insurance will only pay for the stolen electronics because the other items weren’t included in your policy.
Named perils home insurance is usually cheaper than broad or comprehensive insurance because it offers less protection. However, if you have named perils and are thinking of changing your home insurance to have more protection, it’s easy to do. Just talk to your insurance broker about upgrading to a comprehensive or broad-form insurance policy. Just keep in mind that upgrading your insurance will likely cause an insurance premium increase.
Broad
Broad home insurance covers damage to your property but only protects your personal possessions if the damage is caused by a specific risk listed in your policy. For example, if a fire destroys your home and your belongings, but the fire is only listed under your dwelling coverage (another part of home insurance) and not under contents coverage, your insurance provider will pay to rebuild your home but not to replace your belongings.
Broad home insurance offers more protection for the structure of your home than for your personal items. Most broad home insurance policies cover damage to your home caused by fire, theft, smoke, lightning, explosions, falling objects, and impact from aircraft or vehicles.
Comprehensive
Comprehensive home insurance, also known as all-perils insurance, covers your home and your personal belongings in case of damage or loss. For example, if a fire damages your house and everything inside, comprehensive insurance will pay for rebuilding your home and replacing your damaged items. This includes clothing, furniture, electronics, appliances, and sporting equipment.
Comprehensive home insurance also covers your belongings even if your home isn’t damaged. For instance, if a burglar steals your personal belongings, your insurance company will reimburse you for those stolen belongings.
How does contents insurance work for renters or condo owners?
Home insurance is a little different when you own a condo or rent an apartment. This is because condo owners and tenants don’t own the building. We will delve into each aspect in detail below:
Condo owners
For condo owners, the condo corporation will have insurance that protects only the primary structure of the building and common areas, but it doesn’t cover anything within the units. That’s where condo insurance comes in to protect your unit, including any changes you’ve made to the unit itself. Condo insurance will include contents insurance, which is essential for protecting your belongings against common perils such as fire or water damage, which is more common when living in shared spaces.
Tenants
The same goes for renters or tenants. If you rent your home or apartment, you need a renter’s contents insurance policy or tenant insurance to protect your belongings, as your landlord’s insurance policy won’t cover them in the event of damage or theft.
How much insurance do you need?
Contents insurance covers your belongings up to a certain dollar amount. To know how much coverage you need, you should calculate the total value of your items by going through your home, room by room. Your policy should provide enough coverage to replace most or all of your belongings.
When buying contents insurance, it’s essential to ensure that you have enough coverage. People often underestimate the value of their belongings, and cheaper insurance might not provide enough protection. Always compare your options based on the cost and what the plan covers.
If you have valuable items, consider getting extra coverage. Standard policies often have limits or don’t include these items. For example, if you have a large collection of collectables, expensive or valuable jewellery, vinyl records or Star Wars memorabilia, talk to your insurer about additional coverage to protect it.
How to create an inventory list for your home
A home inventory is a detailed list of all the items in and around your home, especially valuables. The best inventories include photos, descriptions, and dollar values for each item. More detail is better. This helps you give a complete list to your insurance provider if your home is damaged or destroyed, ensuring you get the most out of your coverage. Here’s how you can create your own home inventory list:
1. Create a spreadsheet
Start by creating a spreadsheet. To help you keep it organized, add categories, including:
- Electronics
- Appliances
- Clothing
- Toys
- Jewellery
- Collectibles
- Heirlooms
To organize it even further, consider creating one sheet for each room. This is easy to do if you’re using a program like Excel or Google Sheets.
2. List your belongings
Go room-to-room and list everything that you own on your spreadsheet. Make sure to include as much information about each item as you can, especially higher-value items, such as:
- Serial or model numbers
- The value of each item
- Year purchased
3. Include documents
If you have receipts for big purchases like furniture or appliances or appraisals for jewellery, art, or collectibles, scan and add them to your spreadsheet, keeping the paper copies safe in a designated folder or safe.
4. Add photographs or video
As you go through your home, take photos of each room and item, especially the expensive ones. This can be very helpful when filing a claim. For even better proof, consider recording a video tour of your home. This is a great way to show the value of your belongings.
5. Update your list regularly
Update the inventory list of your belongings every year with new items you’ve purchased or received to ensure you have the right coverage. This inventory will serve as proof of your items during a claim and make it easier to provide information to your insurer. Don’t forget to remove any items you no longer own, as well!
Contact BrokerLink today!
Contact BrokerLink today to learn more about contents insurance. Our licensed and knowledgeable insurance brokers are ready to help you figure out what type of contents insurance will work best for your needs. Plus, a BrokerLink insurance advisor can help you purchase quality coverage by shopping around on your behalf for quotes and sharing insider tips, like how to save money on insurance by bundling home and auto policies.
Contact BrokerLink today to start your contents insurance journey. You can reach us by phone, email, or by visiting any BrokerLink branch in Canada.
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