Content Coverage Clarification!
As a homeowner, understanding every aspect of your insurance policy can often feel like navigating an intricate maze. One such area that tends to cause confusion is the concept of Contents Coverage. It's a fundamental part of your homeowners' insurance policy, yet many are unsure when it applies and when it doesn't. In this article, we aim to demystify this topic, providing clarity on policy specifics, types of losses covered, and real-world scenarios to help you better comprehend when you can expect contents coverage to kick in.
What is Contents Coverage?
Contents Coverage, also known as personal property insurance, is a component of your homeowners' insurance policy that provides protection for your personal belongings within your home and around your home. This could include furniture, appliances, clothing, electronics, and other household items. If these items are damaged, destroyed, or stolen due to a covered peril, contents coverage will reimburse you based on the terms of your policy. A good way to determine if something is a personal contents item or is part of the dwelling, is to imagine your home as a doll house. If you flipped it over and shook it, anything that fell out would be a contents item. Anything that doesn’t fall out would be part of the dwelling. The only exception would possibly be some of the major appliances depending on how your policy is written.
Contents coverage also applies to the personal items you have outside of your property also, such as patio furniture, lawn mowers, tractors used specifically to service the insured property, etc.
Policy Specifics: Named Perils vs. Open Perils
The extent of your contents coverage greatly depends on the type of policy you have. There are primarily two types: 'named perils' and 'open perils.'
Named Perils: These policies cover losses caused by specific events or risks listed in your policy, such as fire, theft, or windstorms. If your personal property is damaged due to a peril not named in your policy, you won't receive coverage.
Open Perils: Sometimes these are misrepresented as 'all-risk' policies. They provide broader coverage, protecting you from all sources of damage, except those explicitly excluded in your policy. “All-Risk” is actually a misnomer. “All-Risk” policies don’t actually exist. Under an "Open Perils policy, there are some common exclusions, such as: damage from floods, earthquakes, or normal wear and tear. Don’t make the common mistake I see repeated over and over at nauseum by folks thinking, “I have open perils, all-risk, insurance so I’m covered.” Nothing could be farther from the truth. That common misconception could leave you in a very damaging situation should you fall into one of the exclusions contained in your open perils policy. An Open Perils policy only means it does not deliniate the covered perils; it leaves covered perils open ended; however, it does deliniate and exclude perils it will NOT cover under any circumstances. This policy covers anything that is not specifically excluded, but the term '“all-risk” is extremely dangerous.
Types of Losses Covered
While every policy varies slightly, most contents coverage will protect against:
Fire or Lightning: This includes damage from wildfires and house fires.
Windstorm or Hail: Covers damage from hurricanes, tornadoes, and hailstorms.
Explosion: This could be a gas explosion in your home or a nearby site.
Theft: If your personal belongings are stolen, either from your home or even when you're traveling, they're covered.
Vandalism: If your property is intentionally damaged by someone else, your policy should cover it.
When Contents Coverage Doesn't Apply
Just as important as knowing when contents coverage applies is understanding when it doesn't. As mentioned earlier, certain perils like floods and earthquakes are usually excluded. Additionally, high-value items such as jewelry, art, tractors, cameras, cash, bullion, firearms, or collectibles may have limited coverage and require additional insurance. Damage due to neglect or improper maintenance typically isn't covered either.
Remember that an insurance policy is not a maintenance policy. It is for sudden AND accidental losses. If a hunter takes his or her favorite shotgun duck hunting all season and never cleans it or maintains it and it breaks due to the chambers internal firing mechanisms rusting out, their insurance policy will not cover that damage because they failed to maintain it properly. Although it was sudden, it was not accidental. It was due to a lack of maintenance which is not accidental. They didn’t accidentally not clean it for four months; they just failed to maintain it. Insurance does not cover damage from a lack of maintenance.
Claim Scenarios
To help illustrate these principles, let's consider a few hypothetical scenarios:
Fire Damage: A fire breaks out in your kitchen, damaging your appliances and furniture. Your contents coverage would apply here, as fire is a named peril in most policies.
Flood Damage: A local river overflows, causing water damage to your personal property. In this case, your contents coverage likely wouldn't apply, as floods are usually excluded from coverage. Flood insurance is only available through the National Flood Insurance Program (NFIP) which is administered by the Department of Homeland Security through the Federal Emergency Management Association (FEMA) and Federal Insurance and Mitigation Association (FIMA). If you do not have this vital coverage, consider it. Especially if you live near a waterway.
Theft: While on vacation, your home is broken into and electronics are stolen. Your contents coverage would kick in here, reimbursing you for the stolen items.
Common Confusion
Often times I see “experts” debating what coverage to put a dwelling pack-out under. As we can see from the policy language summarizations and examples above, Contents Coverage, commonly referred to as Coverage C, is for the repair and replacement of lost, damaged or destroyed personal property. Nowhere in the Coverage C verbiage of any policy I have ever read, does it mention the packing out of contents to make access for repairing the dwelling; therefore, it logically follows that content pack-out is not covered under Coverage C. Content pack-out, to make access for repairing the dwelling, should always be included under the Coverage A - Dwelling repair estimate.
A good question to make this determination is this: “Am I repairing or replacing this personal content item, or am I moving this content item so I can get to that part of the dwelling to repair it?” If it is being moved to make room for repairing the dwelling, the pack-out is part of the Dwelling repair estimate. If the item is being repaired, cleaned or replaced (it is damaged beyond repair), it is estimated under Coverage C - Contents.
Final Thoughts
Understanding the nuances of contents coverage can be challenging, but it's crucial to ensure you're adequately protected. Always review your policy specifics, understand the types of losses covered, and know what exclusions apply. If in doubt, consult with your insurance agent or a professional claims manager to clarify any confusion. With the right knowledge, you can confidently navigate the maze that is your homeowners' insurance policy.
Bill Simmons, AIC, CPI, CCI, CASA is the owner of L2 Insurance Consulting LLC, and is a Traveling Property Adjuster with Allstate Insurance. Bill is an industry recognized expert relating to insurance claims and claim related damage. Bill has worked in every aspect of insurance claims from automobile liability and subrogation to property claim specialist, and he has worked both carrier related aspects of insurance claims, for carriers as a staff adjuster and as an independent adjuster. Bill also serves as an expert witness in the insurance claim legal process. Bill lives in Panama City, FL with his wife, Amanda and their two sons, Layton and Lucas.
