What is home contents coverage for renters insurance?

Home contents coverage is one of the three types of coverage that make up a renters insurance policy. Also known as personal property coverage, home contents coverage protects your personal belongings (the contents that make up your home), things like your furniture, clothing, jewelry, televisions, appliances, and more.

A renters insurance policy is made up of three different categories of coverage, and each category offers a different type of protection. In addition to home contents coverage, a renters policy also contains personal liability coverage and medical expenses, so if you are found liable for damage to someone else’s property or cause them injury, your liability coverage will help you pay for some of the cost.

The third type of coverage that makes up a typical renters insurance policy is called loss-of-use coverage. This protection covers you if your home becomes uninhabitable and you need to temporarily live elsewhere. For example, if a fire causes smoke damage and your home needs to be repaired, your loss-of-use coverage will reimburse you for the price of a hotel.

That said, renters insurance does have coverage limits and sublimits, meaning the maximum amount of money you can get paid out for a claim. Certain types of items will have sublimits, such as expensive fine art collections. Not all personal property will be covered, either.

In this article:

• What does home contents coverage cover?

• What home contents coverage does not cover

• How much home contents coverage do I need?

• Replacement cost value vs. actual cash value

What does home contents coverage cover?

Home contents insurance will protect most of your personal property, both in and out of your home. Meaning if your laptop gets stolen while you are on vacation, your home contents coverage will still protect you. It will protect nearly all your personal property — any possession you own from your coin collection to your dining room table.

Home contents insurance protects your personal belongings from the following perils:

• Fire and lightning

• Windstorm and hail

• Explosions

• Riots

• Damage by aircraft

• Damage by vehicle (not your own)

• Theft

• Volcanic eruption

• Falling objects

• Weight of snow, ice, sleet

• Damage from steam-heating/water-heating appliances and systems

• Leakage or overflow of water or steam

• Freezing of plumbing, heating, air conditioning

• Short-circuit damage caused by electrical appliances

Coverage limits for home contents coverage

Although home contents coverage protects your personal property from a wide range of perils, certain belongings will only be covered up to your policy’s sublimit. For example, jewelry may have a sublimit of $1,500. So if your stolen necklace cost $2,000 and your policy’s sublimit for jewelry is $1,500, then you will only be paid out $1,500 for your covered loss (after you pay your deductible).

Most belongings of high value will have a sublimit. Personal property like fine art collections, wedding rings, rare collectibles, guns, and expensive laptops will all have sublimits. That said, you can add endorsements to your renters insurance policy in order to extend your policy’s limits on certain items.

What home contents coverage does not cover

Home contents coverage protects most of your personal property up to your policy’s limit and various sublimits. That said, there will be items that are never covered by basic home contents coverage.

• Your vehicle (that’s what auto insurance is for)

• Data

• Aircrafts

• Certain pets (check with your insurance company about which dog breeds are or are not covered)

• Hovercrafts

• Your roommate's belongings (unless you add them to your policy and increase coverage for their belongings)

Your home contents coverage will also not cover loss or damage due to certain perils, such as:

• Natural disasters

• Property damage caused by pests

• Damages from terrorism or acts of war

Additional coverage for the contents of your home

If you want to add coverage for perils that are not typically covered, or to extend coverage for items with sublimits, you can add endorsements to your insurance policy. Endorsements increase your coverage to ensure that more of your personal property is protected.

There are a few common endorsements that renters add to their insurance policies.

• Scheduled property endorsement: Extends coverage for specific items that are not fully covered under a basic renters insurance policy. For example, you can schedule an endorsement to increase the coverage limit of your wedding ring.

• Earthquake coverage endorsement: A basic renters insurance policy doesn’t cover earthquakes. However, you can add an earthquake endorsement to cover personal property that is damaged during an earthquake.

• At-home business endorsement: If you make more than $2,000 a year from an at-home business, the equipment you use will not be covered by a basic renters insurance policy. You can add an at-home business endorsement to cover some of your business property.

Learn more about the different endorsements you can add to your renters insurance policy.

How much home contents coverage do I need?

How much home contents insurance you need depends on how valuable your possessions are. Before you start shopping for renters insurance, you should take a home inventory of all your belongings. Your home inventory is crucial for the buying process and the claims process. You should list most of your belongings, preferably with photos of them and how much they cost. If you don’t know how much a certain item of jewellery or art costs, you should work with a professional appraiser to determine the value.

You don’t need to list every item you own, there’s no need to detail every sock, but you should make sure to record the value of belongings that would be expensive to replace. Once you know how valuable your items are, you will have a better idea of how much home contents coverage you need. The average renter needs at least $20,000 worth of home contents coverage, but it really depends on your personal finances and the value of what you own.

Home contents coverage deductible

Many insurance policies require you to pay a deductible. Your deductible is the amount of money you have to pay out of pocket before your coverage can kick in. If you are filing a home contents insurance claim, you will first need to pay your deductible. Typically, a renters insurance deductible is either $500 or $1,000.

Say your deductible is $500 and there is a fire in your apartment and you lose $10,000 worth of insured personal property. You will first need to pay your insurance company the $500 deductible, then they will pay for the remaining $9,500 worth of losses.

This is why, at times, it is more affordable to pay out of pocket than file a renters insurance claim. If your $200 shoes are damaged by a burst pipe — it’s cheaper to just buy a new pair of shoes rather than pay a $500 or $1,000 deductible.

You choose the price of your deductible when you buy renters insurance. A higher deductible means lower premiums, but you’d also have to pay more when filing a claim.

Replacement cost value vs. actual cash value

How much your home contents coverage will pay out for a covered loss depends on which type of renters insurance policy you have. There are two types:

• Replacement cost value policy (RCV): This policy covers the cost of replacing your belongings as if they were new. RCV policies cost more but also pay you out more in the event of a claim.

• Actual cash value policy (ACV): This policy pays you out the depreciated value of your belongings. For example, if you are filing a claim for a couch that is 10 years old, the age of your couch will be factored into the price of your reimbursement.