While homeowners can add household content insurance on their home policy, tenants must take out a contents insurance policy to cover the loss of their possessions in a disaster such as a flood or fire.
The risk of a house or apartment fire is real. United States fire departments responded to 403,000 residential fire calls in 2008, causing an estimated $8.55 billion in damages. Tragically, a civilian fire death occurred once every 158 minutes; 2,755 people lost their lives in residential fires that year (Fire Loss in the United States 2008, NFPA).
Dispelling Myths About Household Content Insurance
Some tenants mistakenly believe that their losses are covered under the landlord's building insurance policy. In truth, building insurance policies usually do not cover the tenant's possessions and will only pay to repair or rebuild the building itself.
Another common household content insurance myth is that it is too expensive for lower-income families. There are many options available for cheap household insurance and compared to the cost of replacing all of a family's personal and household items, the monthly fee is a necessary one.
How Content Insurance Policies Work for Tenants
Depending on the insurance company and policy, household content insurance covers either the actual or the replacement value of household contents. The insured pays a deductible when making a claim.
Read the fine print carefully to understand exactly which items are covered and under what circumstances. Some policies limit the amount of coverage for certain types of items; for example, a tenant may be able to claim only $2,000 to replace tools and $2,000 for books. Tenants with valuable possessions may be able to opt for extra coverage, depending on the company.
The insurance company might require the tenant to take pictures or submit a list of all household items. Or, a broad coverage policy could simply cover everything up to the policy limit. See the Cooperators Tenant Insurance page for an example of the types of items and coverage limits that are covered under that type of household content insurance policy.
How to Find a Cheap Content Insurance Quote
Compare the rates of several insurance companies online, then call each one to find a cheap content insurance quote with the best coverage. Ask questions about any specific concerns, such as additional earthquake or other natural disaster coverage.
When deciding how much coverage the entire family requires, consider the cost of replacing:
- Appliances
- Each family member's wardrobe
- Furniture, bedding, and decorations
- Home electronics
- Personal care items
- Toys, games, and recreational items
There are some items that simply cannot be replaced, such as family photos, important personal and financial documents, and family heirlooms. Keep important papers and photos in a fire-safe box, or make digital copies and store on a memory stick at a trusted friend or family member's home. Take pictures of irreplaceable items as keepsakes in case they are lost or damaged. Although it is not always possible, try to save enough money to pay the content insurance deductible, if needed.
Household Content Insurance Tips for Getting the Best Quote
Consider adding liability insurance for an additional fee. If the rental unit sustained damage and the tenant is at fault, this type of coverage helps cover the expense (after the deductible). Some companies extend this coverage to insure the tenant on other properties; for example, if a hotel room suffered damage because of the tenant's unintentional actions, they might be covered.
Understand exactly what types of damage are covered. A household content insurance policy might cover the value of items damaged by water if a plumbing pipe broke, but not if the river behind the house swelled and flooded the property.
Take the time to consider several policies and choose the one that best suits the households needs and budget. Household content insurance is a necessity for tenants who otherwise could not afford to rebuild their lives after a disastrous fire or flood.
For more on personal finance, see Best Debt Consolidation Companies and Using Equity to Secure a Loan.
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