Fire, flood, or other disaster damage can cripple a family without adequate insurance coverage. Many people mistakenly believe that their insurance for homeowners or their landlord's insurance policy will cover the loss of personal belongings and household items. Often, these are not included unless specifically requested and added to the insurance policy.
The Difference Between House and Content Insurance
Homeowner insurance may have additional coverage for personal property or include household items in the policy. It is the responsibility of the homeowner to ensure their insurance policy offers adequate coverage to not only rebuild or repair their home, but to replace household items, as well.
Household content insurance is sometimes called tenant insurance or renters insurance. Landlord building insurance policies typically do not provide coverage for tenant belongings. Each tenant is responsible for insuring their own household items and maintaining the monthly premium or annual fee.
Many Americans Lack Content Insurance
Investment adviser and insurance analyst Errold F. Moody Jr. (PhD., LLB, MSFP, MBA, BScE) shared the following worrisome content insurance statistics in a fact sheet on his website (facts for 2006):
- Almost 25 million U.S. families renting their homes are going bare on insurance coverage, leaving themselves vulnerable to serious property and liability losses.
- Many renters without coverage own valuable, high-tech equipment and face higher risk related to pets.
- A new survey uncovers a persistent lack of awareness or understanding about property and liability risks faced by renters.
- Two-thirds (67%) of U.S. families that rent lack coverage.
Ten Canadian households learned the devastation of losing everything April 5, 2010, when their 11-unit apartment building burned to the ground. According to Fire Victims Still Coping (Owen Sound Sun Times, April 13, 2010), many did not have insurance and must rely on agencies like The United Way for assistance in rebuilding their lives.
How Much Household Content Insurance is Enough?
There is an important difference between two types of content insurance: one type of policy reimburses the policyholder for the replacement value of household goods, while another pays only their best estimate on the actual value of household items at the time of the disaster. A replacement value policy allows families to buy all of the household items they need in a new home, while the actual value of lost goods may not be sufficient.
When calling companies for a content insurance quote, make sure the policy includes adequate coverage to replace:
- Appliances
- Assistive devices: wheelchair, mobility aids, oxygen delivery equipment, etc.
- Books, toys, games, exercise equipment, etc.
- Clothing, footwear, and outerwear for all family members
- Electronics and computer equipment
- Furniture including beds
- Kitchen equipment, cookware, flatware, and dishes
- Jewelry
- Personal care products
- Tools
- Towels and bedding
It can be difficult to place a dollar value on personal possessions. Make a list of all items in the house that would need to be replaced in the event of a fire, flood, or other disaster. Beside each item, list the price of buying one new in today's market. Add the cost of all items for an estimate of the amount of insurance coverage required, then add 15% to account for sales taxes and any forgotten items.
More Information on Content Insurance and Insurance for Homeowners
In 2006, fires alone caused $11.6 billion in direct property damage throughout the United States (Hall, John R. Jr. The Total Cost of Fire in the United States, NFPA, 2009.). Household content insurance is a necessity.
For more information on content insurance policies for tenants, see Why Renters Need Household Content Insurance.
Or, see Understand Fees Before Buying Mutual Funds and Free Credit Report Services for more tips to help consumers make better financial decisions.
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