It’s often helpful to get a handle on exactly what your policy covers—long before you ever need to file a claim. Taking this step can help you make sure you’re carrying the policy coverage and limits that best suit your lifestyle.
In general, a homeowners insurance policy protects your home in the following four ways:
Structural: In the event your home is damaged by a disaster like a fire, hurricane or lightening, your homeowners policy can help pay for repairs. (Note that flood and earthquake coverage is sold separately and may not be available in your area. Contact your homeowners insurance company for more information).
Liability: If a visitor is injured while on your property, this coverage can help protect you. This coverage can also help if you’re found responsible for injuring someone or damaging someone else’s property while you’re away from your home.
Additional living expenses: If your home becomes uninhabitable after a covered disaster, like a house or wildfire, this coverage helps cover the cost of your short-term living expenses.
Personal belongings: Homeowners insurance can help you pay to replace stolen or damaged items after a burglary or insured disaster, like a tornado.
When it comes to your personal belongings, most standard homeowner’s insurance policies cover the loss, minus the deductible. Covered items typically include:
- Furniture
- Electronics
- Appliances
- Clothing
- Bicycles
- Lawn care equipment
Even exterior trees, plants, and shrubs are typically covered, up to about $500 per item. That’s true whether damaged from a house fire, tornado, hailstorm, or even vandalized during a break-in.
There are two methods an insurance company can use to figure out the value of your lost or damaged items. Each will help cover the cost of replacing your damaged or stolen stuff, but the option you select will affect the amount of your policy payout.
Actual cash value: This option considers the depreciated value of an item at the time it was damaged or stolen. For example, a four-year-old riding mower that cost $2,000 may only be worth $1,200 today.
Replacement cost: Alternatively, this method recognizes the amount it would cost to replace a lost or damaged item today. A four-year old riding mower worth $1,200 today would cost $2,000 to replace, for example.
Which should you choose when purchasing or reviewing your homeowner’s insurance policy? In short, the replacement cost option will raise your annual policy premium but could save you thousands of dollars if you need to file a personal property claim.
Long before you have a need to file a claim, it’s often a money smart move to review your current
homeowners insurance needs. Compare your needs to your current policy limits, so you can make adjustments. That often means making an in-depth inventory of the items in your home by chronicling your belongings, most effectively with photos or videos.
If you need to file a homeowner’s insurance claim—like after a hurricane, fire or robbery, you’ll need to give your adjuster a detailed description of the items that have been damaged or lost. The more thorough your
home inventory, the faster the claims process will go, and the better your chances will be of recovering the full value of your belongings.
Fewer than half of all homeowners have
compiled a home inventory. Among those that do have a home inventory, many haven’t updated it in more than a year. Even more haven’t kept a record of purchase receipts or photo or video documentation of their belongings.
In addition to speeding up the claims process after a disaster, having an inventory can benefit you in other ways. Creating a list of your belongings can help you keep track of warranties, establish how much insurance you really need (you may be under-insured currently), and clarify matters in your estate and financial planning.
A written list of your items is a great start but taking photographs and video of what you own can be especially beneficial for several reasons. One is that a visual record backs up your written list and can help you prove ownership of missing items. Another is that it can make it easier to count multiple items, like dinner plates, as well as to identify unusual items that may be more difficult to describe in words or ascertain their value. A photo or video inventory can also be easier to create if you’re unable to make a spreadsheet or fill out a checklist.
