After unwrapping your gifts on Christmas morning, insurance was probably the last thing on your mind. But whether you received a new television or an expensive piece of jewelry, it’s important to ensure that you have coverage for your new valuables.
Although you likely already have a homeowners or a renters insurance policy to protect your home and possessions, it’s crucial to understand that these policies have limits for the amount of personal property you own. For example, a $300,000 home might have a $150,000 limit for personal possessions. While this number may seem high, the value of all of your furniture, electronics, tableware, clothing and jewelry adds up quickly, and new gifts every year bring the total worth of your possessions even higher. Below are several important considerations regarding your home insurance and how new valuable possessions can impact it.
Actual Cash Value vs. Replacement Cost
As noted above, your homeowners insurance policy will have a coverage limit for your personal possessions, but depending on the policy, this coverage could be for the items’ actual cash value instead of replacement cost. Whereas actual cash value takes into consideration depreciation, replacement cost coverage is based on the amount it costs to purchase a new item. For instance, if a piano you purchased several years ago sustains damage, a policy with actual cash value coverage will reimburse the actual cash value of the piano, or the original cost minus depreciation, instead of the value of a new piano.
According to Trusted Choice, replacement cost coverage costs about 10 percent more than actual cash value coverage. The difference between these two types of coverage is important to understand when determining the total value of your personal property and finding the right coverage to protect it.
Coverage limits are another important consideration when it comes to insuring your valuables. Within the personal property coverage limit under your home insurance policy, you may also have sub-limits for certain types of property, like a $2,000 limit for jewelry, for instance. If this is the case, a new engagement ring or diamond bracelet could cause the value of your jewelry to exceed this limit, leaving some of your valuables unprotected. It’s important to review your home insurance coverage with your insurance agent and adjust it accordingly, especially after the holidays if you’ve received expensive gifts.
Are you a collector? If some of your new gifts this Christmas added to a collection of yours, whether it be a collection of coins, trains, or porcelain dolls, you may wish to consider a separate type of coverage known as collectibles insurance. Since homeowners or renters insurance might only offer you a small amount of coverage if your collectibles sustain damage, it may be in your best insurance to opt for collectibles insurance, which typically provides a few thousand dollars worth of coverage for a small premium, according to Trusted Choice.
Not only is it important to have adequate coverage in the event of a claim, but also it’s crucial to ensure that you have an updated home inventory of your possessions. A written or electronic copy of the items you own, their value, and photographs when possible, will prove invaluable in helping you quickly recover from a loss. Haven’t created a home inventory yet? Free mobile apps and software programs like the Insurance Information Institute’s Know Your Stuff – Home Inventory software, will help you simplify this task.
At Knapton, Reade & Woods, it’s important to us that your valuable and meaningful possessions remain protected. As independent insurance agents, we take the time to assess your specific situation and create the right coverage for you. For additional information about insuring new Christmas gifts and other valuables or to get a free insurance quote, please call us at 800-779-4084 or submit our Contact Us form.