Posted on: 4 February 2015
Having home insurance is a necessity if you own your house, but it has limitations you may not be aware of. One of the limitations you should address involves the valuable items you own. All home insurance policies offer coverage for your dwelling and your personal belongings; however, there are several things you should understand about this.
Amount of Coverage You Have
If a fire destroys your entire house, the insurance company is likely to give you enough money to rebuild your house, but the amount they offer is always based on the amount of coverage you had. In addition to this, insurance companies generally offer 50% to 70% of a home's value for personal belongings.
For example, if your house is worth $100,000, you might have $50,000 to $70,000 of insurance coverage for your personal belongings. You can find out this amount by looking at your insurance policy, but you should be realize that this does not mean your insurance company will automatically give you the full amount of coverage you have.
How the Insurance Company Values Items
The insurance company will base the amount they offer you for your personal belongings on two main things. The first thing is the amount of coverage you have, and the second thing is the assets you have. They will also determine the amount based on one of two methods:
- Actual cash value – This method involves placing a value on every item you have to determine each item's current value.
- Replacement cost – This method is the preferred method because it places a value on an item based on how much it will cost to replace it.
To understand the difference, you could look at the difference you would get with a TV you own. If the TV cost $500 three years ago, its current value might only be $50, but you might have to spend $700 to replace the TV with one that is equal to this one. With the actual cash method the insurance company would only pay you $50 for the TV, but with the second method they would pay you $700.
How To Fully Protect Yourself
Hopefully you will never have to worry about filing a claim on your insurance, but it is wise to protect yourself just in case. Here are some tips to help you fully protect yourself if you suffer a partial or complete loss of your things:
- Create an inventory of your things – Write a room by room list of everything you own. Include the purchase dates, serial numbers, and any other important details about your things.
- Videotape your belongings – Making a videotape is another great way to prove which items you have. You should store the tape and your inventory list in a fire-proof safe, or in a bank deposit box.
- Make sure you have the right amount of coverage – It's important to know how your insurance company values items, and whether they will give you the full amount of coverage, or if they will base it on the items you own. If necessary, increase the coverage amount you have.
- Purchase additional coverage – You should also look into purchasing additional coverage for valuable items you own. This can include expensive jewellry or paintings, a gun collection, or anything else that is valuable to you. To purchase additional coverage, you will have to list each individual item you own and let the insurance company know the value of each.
You may want to talk to your insurance agent each year to verify that you have enough coverage for all the insurance policies you have. If you need extra coverage, your agent will help you determine how much to get.Share