Matt Hands, VP, Insurance and MoneySense
Contents Insurance is protection for your personal possessions, whether it's in your house or while you travel. Whether you're a homeowner or tenant, contents insurance offers coverage for your things - be it your furniture, your electronics, your clothing, and your art and jewellery. Contents insurance is part of any comprehensive home insurance policy and is the central portion of a tenant's insurance policy.
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For homeowners, contents insurance is pre-packaged with your comprehensive policy. Depending on your insurance provider, there are limits, exclusions, and even coverage for things you don't own. Still, because it's an overall umbrella package, the idea to cover everything is considered a best practice.
For tenants, contents insurance and their limits are more defined. You tell the insurer how much contents insurance you need to protect all your valuables. For example, you could have a small wardrobe, an old tv, and a cheap laptop and to replace everything you need $5,000, so you can buy contents insurance for that amount. But, you could have a 4K LED television, a high-end laptop, and rare jewellery - to replace it all could cost $30,000. So, you'd seek that amount of contents insurance. You decide the best contents insurance for you.
With either type, it's best to keep track of your valuables and ideally with their receipts. It makes claims management much easier.
Contents insurance is one component of a tenant's insurance policy. Tenant insurance also includes third party liability insurance protecting you, the tenant, in case someone injures themselves inside your space. It also covers additional living expenses if you need to move out of your space. For example, let's say you're the victim of a major flood or fire, tenant insurance will pay for your accommodations elsewhere while repairs take place in your home.
Tenants are encouraged to buy their own insurance; in fact, some landlords insist on coverage.
Without tenant's insurance, If you lose all of your valuables in a fire, those items are gone. Your landlord bears no responsibility for your possessions. That said, a tenant should look at other endorsements (add-ons) to their policy, especially if they live in a basement apartment. Many perils are covered, like damage from a fire or a burst pipe.
Still, there are also many exclusions where you wouldn't be covered. For instance, if the main sewer line backs up or if heavy rain is the cause of the flood, you'll want to add a sewer backup endorsement and an overland water endorsement, respectively.
How much contents insurance should I have?
Create a home inventory – an itemized list of all your belongings and their relative value. Add it together to know how much to get. Store the information in the cloud for safety.
A peril, or risk, is an event that could damage your home and its property. Common perils protect standard risks in most home insurance policies. They include damage from electrical current, explosion, fire, lightning, smoke damage, theft, vandalism, water damage from a burst pipe or wind and hail damage.
However, it's vital to read your policy and understand any exclusions that may exist.
For example, if you live in an active earthquake zone, you need to add earthquake insurance to your policy to be protected.
If lightning strikes, most policies will cover any related losses. But what if the lightning strike created a power surge destroying your precious electronics - would they be protected?
Finally, let's say you're the victim of vandalism and theft. Most policies will reimburse you for any damage, and thanks to your contents insurance, you will be able to replace your valuables. However, there are limits to how much your insurance provider will give you.
So, know what perils you're protected against, and what you're not. Seek endorsements or add-ons where needed.
Replacement cost is the cost to replace your contents with other contents of comparable material and quality. For example, if someone steals your 5-year-old laptop, the claim payout you'll receive allows you to buy a new laptop, with the same features as your 5-year-old model. A replacement cost policy is more expensive, but you'll receive more money to buy the closest comparable items.
Actual cash value
Actual cash value (ACV) is the cost to replace with new contents of like kind and quality, less depreciation. For example, a fire causes damage to your 7-year-old television. Your insurance company will determine the current used resale value of the TV and provide you with that amount as a payout. An actual cash policy is typically a cheaper premium, but you'll likely be paying out of pocket to get the full value back.
Your home insurance policy will set out specific contents insurance limits and exclusions.
Generally, exclusions include things like glassware, china, collectibles, antiques, or fine arts. Still, you can always insure these items by "scheduling" them with your home insurance provider. Scheduling means you're listing a specific item for a predetermined amount of money, and they'll tell you how much it will add to your premium.
There are also items with special limits, meaning they are covered, but maybe not to the full extent of their value. They include things like bicycles, golf carts, watercraft, jewellery and watches, fur items, silverware, or a wine collection. Again, you can buy extra insurance for these, either with your primary insurer or a third-party insurer. If you do opt for a third-party insurer for one particular item or set of items, make sure to understand all of the applicable exclusions.
Each insurer will set different limits on each item or collection, so be sure to understand yours, especially if they are valuable to you.
Content types and limits (click to view)
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Call your insurance company
Either by phone or connect with them online as soon as reasonably possible after the event occurs. You'll want to understand what to do, and more importantly, what not to do right away. Ideally, you'll take photos and have your itemized list ready to go. Don't throw anything out unless you have a quality photo of it and your insurer has said it's ok to do so.
Create and submit your claim
You'll fill out all the necessary paperwork, and they'll give you a claim number to track its progress. List out all the contents that are insured and for what you're claiming. Again, photos and receipts are essential to a hassle-free claims process.
Gather your estimates
Your insurance provider will send out a claims adjuster to assess the damage and provide an estimate or recommend a contractor to help you out. Getting your own estimates from a third-party will still prove valuable because you’ll have ideas on what things will cost and their estimated turnaround time.
Hire an approved contractor
Your provider may send you a list of contractors they insist you use, and if so, you want to make sure that they'll do a good job and complete the repairs up to your specifications. Update your insurer regularly with details of the rebuild and disaster recovery.
Make the payments for your repairs
After the claim is processed, your provider will notify you and either send a cheque directly to you or the chosen contractor. They may pay you in one lump sum or in multiple cheques. Keep track of everything.
Complete your repairs and buy your replacement items
Don’t let it lag behind and always keep in touch with your insurer if you’re unsure about anything.
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Matt Hands, Business Director of Insurance
With 6+ years of experience at Ratehub.ca, Matt’s focus has been on growing its newest business unit, Insurance. He is a thought leader and a valuable resource to respected publications across Canada. read full bio