Understanding Contents Coverage

By Yolander Prinzel | November 25, 2011 AAA

When you buy a home insurance policy before moving, you will see that the coverage is broken up into dwelling and structures and contents. The contents coverage in your policy is referring to your personal belongings like furniture, electronics and clothes. But the specifics of your contents coverage are even more detailed than that.

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Contents Coverage Covers Jewelry and Valuables
If you have no other insurance for them, then your contents coverage will cover your jewelry and other valuables. But remember: you have just one limit on the contents coverage of your policy. If you have extremely valuable jewelry, art or other collectibles, then you may want to work with your insurance agent before you move and get your valuables valued for insurance purposes, and then have them covered either by special certificates or other policies so that your contents coverage offers sufficient benefits for claims caused by the loss of your other personal property.

The Tangible and the Intangible
Your contents coverage doesn't just provide insurance protection for the things in your house that you can see and touch, it also provides protection for your intangible property like MP3s, applications and downloaded software. As with any personal property, you must prove that you owned the intangibles that you claim, what you paid for them and that you lost them before you will be reimbursed. If you've purchased the intangible electronic data from a company that allows you to re-download it, then you would not be reimbursed.

Replacement Value Vs. Actual Value
Your policy can call for you to be reimbursed an amount equal to either the actual value or replacement value of the items. Replacement value is the amount that it would take for you to replace the lost item, whereas actual value is the amount that the item, with wear and tear, would be worth. Actual value might not give you enough money to replace an item, since replacing it usually means buying it again at the new retail price.

The Bottom Line
The goal of any insurance policy is to make you whole after a loss, not to help you to profit from one. Your contents coverage will help to ensure that you get reimbursed an amount that you are entitled to receive, and can prove that you are owed. But, it will only provide benefits up to the limit on your policy, and anything lost that doesn't exceed the deductible will be solely your responsibility to replace. (For more on different insurance policies, read 5 Insurance Policies Everyone Should Have.)

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