The knowledge that your home is protected against loss through a home insurance policy will probably give you peace of mind. However, have you ever taken the time to read the small print of your contract? How certain are you that your personal possessions are adequately covered in the event of theft or a natural disaster? Can you expect them to be replaced in full if the need arises?
What Is a Standard Home Insurance Policy?
Standard home insurance--often referred to as an HO3 policy--provides coverage for the structure of your home, your personal belongings, liability protection and any living expenses you might incur if you're forced to leave your home due to an insured event. While losses are often covered for their full cost of replacement, some policies will place a cash limit on how much can be claimed. This may be a pertinent point to consider if you own expensive furs or jewelry.
In most cases, the standard level of coverage will only cover "named perils." For instance, floods are rarely covered with standard home insurance, and if your personal possessions are lost in floodwater, you will not be able to make a claim. A comprehensive policy, referred to as HO5 coverage, will usually have an "open perils" policy. This means that your personal possessions are covered from loss due to any eventuality, unless the contract specifically states otherwise.
What Is Covered?
Unfortunately, this question does not come with a generic answer. Policies can differ greatly between states and providers, so it is always a good idea to take the time to read your policy documents carefully before making a commitment. In most cases, your clothes, furniture, electrical gadgetry and general household items will be covered from theft, fire, hurricane or any disaster specifically named in the contract. To what extent your belongings are covered also depends on your policy and where you live, but most providers will provide coverage for your possessions up to a maximum of between 50% and 70% of your structural coverage. That means if the structure of your home is insured to the tune of $100,000, you can expect your personal possessions to be insured for between $50,000 and $70,000.
Is Your Coverage Sufficient?
The best way to determine whether or not your insurance coverage is sufficient is to take a full inventory of your personal possessions. However, you must bear in mind that you need to record the cost of replacing items and not their current market value. You may also be covered for off-premises losses, but this will usually be specifically mentioned in your contract. The level of coverage for items lost or damaged outside the home will be significantly lower than your total coverage for lost possessions--typically around 10%. You may also have coverage for the unauthorized use of credit cards, but this provision rarely covers you for more than $500. If you own particularly expensive items, you should seriously consider a personal property endorsement or floater, which should cover specific items, such as furs and diamonds, from all forms of loss.
Don't fall into the trap of taking the cheapest home insurance deal possible without taking the time to study the small print. If you're concerned or confused about insuring the full value of your home and its contents, call us now at 512-454-4567 and we'll be happy to discuss your situation in more detail. You can also get a quote online for your Austin home insurance.