Learn the basics of home content insurance

By: Eddy | Posted: 18th October 2010

When moving to a new place, renters insurance is usually the last thing some people take into consideration. Cable, internet and telephone seem to be the priority for the majority. Normally, your landlord will have an insurance cover, but what most people don't realise is that it covers only the building, not your personal possessions. If you want a peace of mind knowing the content of your home is covered by insurance, you need renters insurance. It can be incredibly expensive to replace your valuable belongings or defend yourself against liability lawsuit.

There are two types of home content insurance - HO-4 for renters and HO-6 for condo owners. Normally, these policies offer protection against theft, fire, hail, criminal damage etc. Having said that, floods and earthquakes are usually not included by default. If you must be protected against floods and earthquakes, the insurance company will consider the risks and may provide you cover at extra cost obviously.

When figuring out the total value you want to insure your personal belongings against, there are two important things. Actual cash value (ACV) and replacement cost coverage. The phrases are virtually self explanatory but here is a quick example. If your two year old notebook is stolen, ACV coverage will pay only as much as the notebook costs at that moment in time - far less than say the $500 you purchased it for. Replacement cost coverage, on the other hand, will pay as much as its needed to buy an equivalent notebook today.

Of course, you will have to pay extra if you want replacement cost coverage. Some argue that its better value for money to get ACV regardless.

Its a common practice for very valuable objects, like antiques and jewellery, to be stated on the policy explicitly. Its even better if you have receipts or certificates, which clearly show the value of such objects.

What happens if your home is damaged?
In case your place of residency becomes unliveable due to fire or smoke, your renters insurance policy will cover your "additional living expenses" (ALE). You may have to temporarily live in a hotel or another apartment within the same price range. Normally, the limits for ALE are 30-40% of the overall insurance policy value. Its unusual for repairs to take more than a few weeks but most policies have additional living expenses cover limits of up to twelve months.

Another standard benefit of renters insurance is liability protection. You probably wander what do you need liability protection for? It covers you in case a person gets injured in your apartment and decides to take legal action against you. Obviously, certain limits of cover are in place too.

Just how much does home content insurance cost?
In reality, no two people pay the same amount even if they live in similar properties. In addition to the key factors mentioned previously, your credit history and age group can play a role too. Compare insurance quotes from different companies and see for yourself. Don't forget, the cheapest quote is not necessarily the best. You should definitely check the limits and type of cover included in your insurance policy.
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Tags: phrases, important things, cable internet, moment in time, insurance company, receipts, landlord, peace of mind, personal belongings, acv, hail, total value, floods, condo owners, earthquakes, personal possessions, jewellery, renters insurance