What is contents insurance?

When it comes to protecting your property, it’s not just about the walls, roof, and foundation of your home. It’s also about what’s inside. Contents coverage, also known as personal property coverage or Coverage C, is a crucial part of your homeowners insurance that provides financial protection for your belongings against covered events, like theft, fire, or certain types of water damage. 

Understanding contents coverage

The contents coverage component of your home insurance policy will help pay to repair or replace personal belongings stolen, damaged, or destroyed by a covered loss. Though coverage details vary by policy and insurer, contents coverage generally protects:

• Clothing

• Furniture

• Electronics

• Appliances

• Tools

• Jewelry

• Artwork, collectibles, and musical instruments

• Sporting and fitness equipment

• Cash

What’s not covered by contents coverage

In a standard home insurance policy, contents coverage helps pay to replace personal belongings that are damaged by a covered peril, such as fire, smoke, theft, vandalism, wind, hail, and specific instances of water damage.

However, most policies exclude certain types of damage, including: 

• Flood damage, unless you have a flood coverage endorsement or policy 

• Earthquake damage, unless you have an earthquake coverage endorsement or policy

• Wear and tear or gradual deterioration

• Pest damage, such as from termites or rodents

• Intentional damage caused by the policyholder

• Business property beyond certain limits

• Mold and mildew, unless it's the direct result of a covered peril, such as efforts to extinguish a fire

• Water backup, such as from a failed sump pump, unless you have a water backup coverage endorsement

How are content coverage claims paid?

When you file a content coverage claim, your insurer may determine the claim amount in several ways. The most common methods are actual cash value and replacement cost. 

Actual cash value 

In most standard home insurance policies, actual cash value (ACV) is the default payment method for content coverage claims. When this method is used, your claim check will reflect the item's depreciated value, rather than its market value.  

Suppose a fire destroys your couch, and though you originally paid $4,000 for it, it’s a few years old.. Your insurer estimates the depreciated value at $2,800, so they will issue a claim check based on that amount, minus your policy deductible. 

A policy with ACV coverage for personal property is generally less expensive, but you may find that you’ll pay more out of pocket after a claim. 

Replacement cost coverage

After a covered event, replacement cost coverage will reimburse the cost of replacing a damaged or stolen item(s) with that of the same or similar kind and quality. 

Using the same example above, if a covered event damaged your $4,000 couch, your claim payout would reflect the cost to replace it with the same or a similar couch, minus your deductible. 

In most cases, you need to add this type of coverage to your policy, which usually increases the premium. However, the contents of your home will have more robust coverage than offered through a policy with ACV coverage.

Scheduling personal property

Because specific items, such as jewelry, fine art, firearms, and collectibles, are often subject to sublimits, many insurers allow policyholders to schedule personal property or add extra insurance for high-value items.

This is commonly done by adding a rider or endorsement that lists explicitly each item and its appraised value. If you schedule an item, you generally must provide documentation, such as receipts or appraisals, proving its value. Scheduled items are usually insured for their full value, and claims typically don’t include deductibles. 

Tips for purchasing enough contents coverage

• Inventory your belongings. Create a detailed list of your possessions, including photos and receipts, to accurately assess their value.

• Understand policy limits. Contents coverage is generally set at 50% to 70% of your dwelling coverage, but review your inventory to ensure that’s enough to cover your belongings. Also, be aware of sub-limits for items like jewelry, art, or collectibles. You may need to schedule coverage for these items.

• Choose the right coverage type. Assess your budget, financial flexibility, and claim payout preferences to decide if replacement cost or actual cash value coverage is best suited for your needs.

• Review and update regularly. As you acquire (or get rid of) new items or make significant purchases, update your inventory and coverage accordingly.

How to file a contents coverage claim

1. Notify your insurance company right away to begin the claims process and avoid delays.

2. Document the damage thoroughly by taking clear photos or videos of each affected item.

3. Gather supporting documentation, such as receipts, appraisals, or a detailed home inventory, to verify item value.

4. Submit a complete list of affected items, including descriptions, purchase dates, and estimated replacement costs.

5. Work closely with the claims representative or adjuster, who may visit your home or ask for additional information to assess the loss.

6. Provide proof of replacement or purchase, especially if your policy offers replacement cost coverage instead of actual cash value.

7. Keep detailed records of all claim-related communications, receipts, and out-of-pocket expenses.

8. Receive your settlement payment based on your policy’s terms, limits, and deductibles once the claim is approved.