Contents insurance is one of the most important investments you will make as a homeowner or renter. But do you have enough? A comprehensive policy covers your home against someone injuring themselves on your property. It also covers you for damages to the building, from perils such as a storm or vandalism. Your home policy also includes contents insurance, which is financial protection in case your belongings are lost or damaged. Whether you own your home or are renting, it’s important to remember that not all insurance policies are created equal. To better understand contents insurance, let’s examine what is covered, what may be excluded, and how to ensure you have enough coverage for your valuables.
What is contents insurance?
Contents insurance covers the financial cost of replacing personal items that belong to you and your family. Your belongings are typically called your “contents” on a home insurance policy. This includes everything in your home and property, including garage and backyard shed items. Contents insurance policies can differ somewhat, depending on your living arrangements and whether you own a detached house, a condo, a townhome, or if you rent.
Most comprehensive home insurance policies include protection for personal belongings and compensation for damages or losses because of named perils, such as vandalism, fire, theft, and more. Broad or named perils policies also cover you, but at lower limits. In short, they exist to pay you partial or full replacement costs (or, if applicable, repair costs) of the items in your home that were damaged or lost.
All policies have a maximum limit and include sub-limits for specific types of items, such as cash, antiques, and jewelry. You can purchase a policy endorsement for added protection if you have high-value items.
What does contents insurance cover?
Typically, a contents insurance policy covers your possessions up to a certain agreed-upon dollar amount. To know exactly how much coverage you need, you need to know how much you actually have. The most effective way to determine your needs is to go through your home, room by room, to determine the total value of your things. The amount of coverage your policy provides should allow you to replace all (or the majority) of the contents in your home.
Items that are typically included under contents insurance:
- Furniture
- Appliances
- Electronics
- Décor items
- Toys
- Jewelry
- Clothing
- Decorations
- Bikes
- Instruments
- Books
- Minor appliances
- Office supplies
- Bathroom essentials
- Collectibles
TIP: Keeping an updated inventory of your belongings yearly will ensure you have the appropriate coverage. Special events like birthdays, anniversaries, or even Black Friday splurges will affect your inventory’s total value. This inventory will also act as proof of personal items during a claim and make it easier for you to provide information to your insurer. So, keep these records somewhere safe!
How to create a home content inventory:
- Photographs: Having hardcopy views of your valuables yearly will help you track your possessions in detail.
- No drawer unopened: Make sure to include the items you don’t normally see daily, such as those found in closets, cabinets, your garage, or your work shed.
- Keep a record: Use a spreadsheet or log system to estimate the value of items in each room, in combination with your photos.
- Higher-value items: Identify items, such as electronics, a mountain bike, or family heirlooms, with unique markings, such as an asterisk (*).
- Serial or model numbers: These should be captured and included in your log.
- Keep track of costs: This includes receipts or appraisals for any particularly high-value items.
You can use a spreadsheet to add up the value of everything documented to give yourself a rough idea of how much coverage to buy. With most policies, your limit will be about 70% of your total building coverage amount. Check with your isure representative to verify your limits.
What is a “contents limit”?
Your contents limit is the maximum amount that your insurance company will pay out in the event they have to reimburse you as a result of a claim. Note that your insurance may cover a maximum amount for specific items, and you may need to purchase additional coverage via special endorsements.
Factors that may affect the cost of contents insurance
The price of contents insurance is determined by the items you insure. A good rule of thumb is $1 for every $1,000 worth of valuables you’re insuring. The average price of tenant insurance is $15/month. The average price for home insurance is about $120/month, depending on the location and risk. Both of these policies include contents coverage, however, each insurance company may calculate this limit slightly differently. It usually represents approximately 30% of the cost to rebuild your home.
There are many factors that can impact your contents insurance rates, including:
- Type of plan, i.e., Comprehensive or named perils
- Plan limits
- Replacement cost or actual cash value
- Exclusions
- Your deductible
- Adding extra coverage for high-value items, i.e., endorsements
For a breakdown of home insurance policies, please read our article, “What is home insurance in Ontario?”
Perils, exclusions, and scheduling endorsements
What is a peril?
Contents insurance policies cover a wide variety of potential “perils” or “risks” that could impact your belongings. Damages or loss due to fires, smoke, water damage, theft, vandalism, windstorms, or hailstorms are just a few of the risks that are claimed each year. Depending on where you live, you may choose to add an “endorsement” (additional coverage) to your policy that protects your contents from less common risks, such as earthquakes or “overland” flooding. These events are rarer. Therefore, they aren’t included in most contents insurance policies.
What are exclusions?
It is vital to read your policy and understand any exclusions that may exist. Most policies will reimburse you for any damage if you’re the victim of vandalism and theft. With your contents insurance, you will be able to replace these valuables. However, there are limits to how much your insurance provider will give you. Knowing what perils you’re protected against or which items are not covered by a home policy is essential. A standard home contents insurance policy will cover your appliances if damaged or destroyed in a fire, storm, flood, or other natural disasters, or stolen. But it won’t cover these kitchen essentials if they break down due to age, wear and tear, or are accidentally damaged. To protect your home against excluded perils (such as sewer-backup and floods), you may be able to purchase optional coverage.
Contents exclusions
Generally, exclusions under the contents section of your home policy include things like glassware, china, collectibles, antiques, or fine arts. Still, you can always ensure 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. This is also known as an “endorsement” or add-on to your home policy.
Why do you need extra coverage with contents insurance?
Contents insurance covers loss or damage to the personal belongings you keep in your home. However, comprehensive policies limit the amount your insurance company will pay out for specific items that are lost, stolen, or damaged. There are special cases where belongings may need a little extra coverage, and that’s where an added endorsement for contents insurance comes into play. On your policy, some items with special limits may be covered, but maybe not to the full extent of their value. This includes bicycles, watercraft, jewelry, watches, or silverware. Again, you can buy extra insurance for these with your primary insurer or a third-party insurer.
Remember to contact your insurance provider to see what they cover and what their limits are per item. If you find you need more contents insurance or to add an endorsement, speak with an isure broker to help you find a provider more suitable for your needs.
Actual Cash Value (ACV) insurance vs. replacement cost insurance
The type of content policy you have can significantly impact how you are compensated for a loss. You must determine which type of contents insurance you want: Actual cash value (ACV) or replacement cost.
Replacement cost insurance gives you money to replace the lost or damaged items equal to the amount you’d need to replace them with a new or similar product. It is a more expensive policy, but you will receive more money to replace your item with something comparable to what you had.
Actual Cash Value (ACV) insurance, however, takes into consideration the replacement cost but also the depreciation:
ACV = Replacement cost – Depreciation
The downside to ACV insurance is that you may have to put in some of your own money to replace items, as the value can depreciate over time. But your premiums will be lower.
Contents insurance for renters
The premium for contents insurance will vary based on your type of policy. If you rent, your contents insurance is included as part of your tenant’s insurance. Since you don’t own any part of the structure, a renter’s contents insurance policy strictly protects the possessions you’ve brought into the space, whether that’s a unit in an apartment building or an entire house. For tenants, contents insurance and its limits are more defined. Utilizing the same home inventory for your valuables (listed above) will help your insurance company determine how much contents insurance you need.
Contents insurance for condominium owners
Contents insurance for condo owners can pose some confusion. While the condo corporation that owns your building has insurance, this protects only the primary structure and the building’s common areas, such as the lobby and gym. Since you’re the owner of your portion of the building (your suite), you’re responsible for everything within it. This means your possessions and any improvements you may have made, such as upgraded flooring or appliances. Be sure to discuss any upgrades or renovations you make to your unit with your isure broker to update your coverage. In case of a fire or damage due to water in your suite or a neighbour’s, you want to make sure that your reimbursement reflects your investment.
Whether you rent or own, you have a lot of personal possessions that need protection. Your clothing, furniture, and electronics all add up. A contents insurance policy ensures you have added protection if your things happen to be stolen, damaged, or vandalized. Make sure you have the right coverage and speak with one of our isure representatives today to help you protect the possessions you cherish.
Learn the key differences between home and contents insurance in Read more
Wondering what impacts your home insurance premium in Ontario? From Read more
Jewelry is personal and sentimental. More than any other type Read more
