What is contents insurance?
Contents insurance provides you with protection for your personal belongings. It is different from home insurance and condo insurance. It safeguards the things you have in your house and the things you bring with you when you travel. It is included in comprehensive coverage and is a significant part of renters insurance. Contents insurance covers the most common things people have in their residence, but some things may not be included. Check with your insurer for clarification.
How does contents insurance work?
Contents insurance works like other types of insurance. It covers the financial cost of replacing the things that belong to you and your family.
Contents insurance is included in most homeowner policies and include protection for your belongings and valuables. It protects your belongings from damage or loss from fire, break-in, vandalism, theft, water damage, and more. It is also included in broad or named perils policies, but you may have lower limits. It provides cash value compensation for loss because of named perils.
All contents insurance policies have a maximum limit. They also include sub-limits for specific types of possessions such as cash, antiques, and jewellery. If you have high-value belongings, you can purchase a policy endorsement for added protection. These add-ons will increase your premium.
Keep in mind that if your rent, your landlord's insurance will not cover your personal items. You’ll need contents insurance for this protection.
What are the types of contents insurance?
How you are compensated and the amount of money you receive from a claim depends on your policy details. The type of contents insurance policy can have a significant impact on how you are compensated for a loss. There is an important distinction to be made between actual cash value and replacement cost. Here’s a breakdown:
- Guaranteed replacement cost or replacement value: When replacing your things after a claim, you will get the amount to replace them with something of comparable quality. This is the more expensive of the two options. You will receive a higher compensation amount from your insurance company for your things.
- Actual cash value (ACV): You will receive replacements of similar quality. For example, if your 5-year-old couch was damaged because of a leak, you will be compensated for the current resale value of the same model used couch. This is a more affordable option, but you will receive less protection from your insurer.
Speak with a ThinkInsure advisor to get clarification about these content insurance options.