If you lost your belongings, would your coverage replace everything?
Posted September 4, 2009
Homeowner's insurance policies are based on the value of the structure. It's quite simple to determine what the amount should be for the structure. But how do you know if your contents are properly insured?
Most insurance companies base the personal property (contents or possessions) coverage on a certain percentage of the amount for which your home is covered. That number is typically anywhere from 50% to 75%. So, if you have a home insured for $200,000, and you have coverage at 50% of your structure value, you would be insured for up to $100,000 for all of your personal property.
Is this coverage enough? Unless you have a receipt for everything you own, the best way to determine this is to compile a home inventory. Record your belongings room-by-room, the format preferred by insurance companies. Log the manufacturer, model numbers, serial numbers, cost and when purchase dates. If something is unique, additional descriptions are helpful. Take photos of full room views as well as close-ups of special items. Don't forget the exterior, garage and any other buildings on your property. This seems like a long, detailed process. If it's something you choose not to do, hire a professional inventory service provider. The cost is reasonable; usually approximately the cost of your deductable.
This inventory will give you a list of what you own and the estimated cost to replace the items if you should face a theft, fire or natural disaster. Once everything is listed, you can total the costs to determine the true value of your belongings.
Next, you'll want to check your policy to determine the limits that your policy stipulates. There are quite a few items that limit what the insurance company will pay out unless you purchase a rider. Some of these limits, the common ranges are:
• Jewelry: $1000-$3000
• Guns: $1000-$3000
• Silverware: $1000-$3000
• Business Personal Property: $1000-$2500
• Sports/Stamp Collections: $1000-$2500
• Money: $200-$500
Do you have a lot of high-end electronics, expensive furniture or other household items that add up to more than your current policy? It might be in your best interest to purchase additional coverage.
If you have a large amount of jewelry, guns, collectables, etc., you will want to purchase riders for those special items.
The cost of additional insurance is minimal compared to your potential loss. And if you haven't experienced a disaster after years of paying premiums, you can be thankful for your good fortune. The value of peace of mind cannot have a dollar sign attached to it.
Cindy Hartman is President of Hartman Inventory LLC, a woman-owned business that provides business and home inventory services for estate planning, estate settlement, financial planning, disaster recovery and more. Her website is HartmanInventory.com.