Contents insurance 101: What it covers and why you need it

Imagine waking up to find your basement flooded or your home broken into and ransacked. While home insurance covers your house and property, it’s the things inside—your furniture, electronics, family heirlooms—that make it your home. While contents insurance can’t replace the irreplaceable, like photo albums and original artwork, it can take the financial load off and ease your recovery process in case the worst comes to pass.  

But to choose the right coverage, you’ll need to know the basics of contents insurance (also called personal property coverage or personal possessions insurance), including what it covers, who should get it, and how to choose the right coverage amount.  

What is contents insurance? 

Contents insurance is a component of home insurance, covered under the comprehensive portion of your home insurance. It pays for the repair or replacement of your personal items if they get damaged or lost due to events like fires or theft. 

Most home insurance policies provide this type of coverage up to a specific limit per item, ranging from $1,500 to $3,000, to homeowners, renters, and condo owners (anything valued more than that should have its own separate policy).  

Read more: How much home insurance do you need? 

Who should have a contents insurance policy?  

If you own valuable items like jewelry, electronics, or furniture, having contents insurance is a no-brainer.  

However, even if you don’t think your personal items are worth much, they add up. For example, a Lowest Rates report found that the total replacement value of the contents in an average two-bedroom apartment is $50,939,74, excluding tax. Even the most budget-conscious couples typically own at least $11,957 worth of possessions.   

For most people, paying out a little bit more a month makes all the difference if you lose all your belongings in a fire.  

What does content insurance cover?  

Before getting into what kind of personal belongings this type of insurance covers, it’s important to know the kind of events, causing damage or loss of possessions, that contents insurance would apply to: 

• Theft  
• Explosion  
• Vandalism  
• Fire and lightning! 
• Weight of ice, sleet and snow 
• Water damage from burst pipes 

Contents insurance covers a wide range of items, including some you might not even think of grabbing in an emergency like your winter coat, or coffee maker, or headphones. Here’s more of what this type of coverage can protect: 

• Furniture  
• Art  
• Jewelry  
• Clothing 
• Kitchenware 
• Decor 
• Firearms 
• Books 
• Electronics like TV and laptops 
• Bikes, e-bikes and e-scooters 
• Sporting equipment 
• Appliances that are not permanently installed in your home (think toasters and blenders) 

What does contents insurance not cover? 

While contents insurance shields your personal belongings from different risks, there are exceptions. For instance: 

• Items damaged due to regular wear and tear, like an old roof or appliance replacement. 
• Items that have been accidentally damaged, like computers destroyed by a spilled drink. (Though some spills might be covered – and you can often buy additional coverage for accidental damage if needed.) 
• Some exceptionally expensive items like fine jewelry that are under a separate insurance policy 
• Personal vehicles and aircraft   
• Installed features like flooring, cabinets, and built-in appliances 
• Items belonging to non-family tenants or roommates  
• Misplaced belongings 
• Items used mainly for business like office supplies  

Lastly, if you’re moving to a home with the help of a moving service, your contents insurance won’t protect your belongings if they get damaged during the move—whether while the movers are handling them or when they’re being packed. However, moving companies often have their own insurance, which includes basic coverage based on the weight of your items. It’s important to review the company’s insurance policy to understand the extent of coverage and any exclusions.  

What are the types of content insurance?    

In the event of a loss, the type of coverage you have will greatly impact how you’ll be compensated for your lost or damaged items, and there’s only two to consider: replacement cost and actual cash value (ACV).  

But in what way are they different? Here’s what you need to know:  

Replacement cost coverage

Replacement cost coverage ensures that your insurer will pay to replace any damaged or stolen item covered by your insurance with a similar item of the same quality. No need to worry about depreciation. 

If the value of your personal property exceeds what your standard home policy covers, consider purchasing replacement cost insurance. This type of coverage allows you to replace damaged or destroyed items at current market prices, rather than their depreciated values. Although it may come with a slightly higher premium, it offers better protection in the event of a claim. 

Actual cash value (ACV) coverage

This coverage pays for your insured items based on their original cost, minus depreciation. 

ACV policies have much lower premiums. Since most home insurance claims deal with partial damage rather than full replacements, ACV can be a cost-effective choice.  Keep in mind that contents insurance only covers a certain amount of your belongings, usually 50% to 70% of what your home is insured for. For example, if your home is insured for $300,000, your belongings would be insured for $150,000 to $210,000. 

The coverage limit is the most your insurance company will pay for a claim. For example, if your coverage limit is $150,000 and your belongings are stolen, costing $180,000 to replace, your insurance will cover $150,000, and you'll have to pay the remaining $30,000 yourself (plus your deductible). 

Related: Replacement value is central to home insurance pricing. Here’s why  

How does tenant insurance differ from property insurance?  

Tenant insurance is different from property insurance because it mainly covers your personal belongings inside the home (the landlord would be the one with property insurance, covering the structural elements of the building or unit).  

In addition to contents insurance, tenant insurance also includes additional living expenses (ALE), which means if your place becomes uninhabitable due to flooding or fire, the insurance will pay you to stay somewhere else, like a hotel, until you can move back in.  

If someone gets injured while in your residence and decides to take legal action against you, tenant insurance will also provide you with the liability protection needed. This also applies if you accidentally cause damage to other people’s property (including your own), such as leaving a tap running and causing water damage to a neighbouring unit. 

When you get tenant insurance, you estimate the total value of your belongings and choose a coverage tier – it usually starts at around $30,000. The amount that you choose to be covered for will factor into your monthly premiums. While tenant insurance isn’t legally mandated, most landlords will request that tenants take out their own policy, which generally costs around $15 to $30 a month.  

How do you figure out the coverage amount — and what type — is best for you?  

One way to figure out the total value of your personal belongings is to create an inventory by saving the receipts for your purchases and taking photographs of your belongings. As you do this, make sure you take note of the serial numbers for electronics, makes and models and the year of purchase. For valuable items without receipts, consider hiring an appraiser. 

If your personal belongings tally up to a total value of, say, $30,000, you’ll want to purchase replacement cost contents insurance equal to that amount. But don’t lowball yourself – if you own valuable items like fine jewelry or art, which pushes the value of your contents beyond $50,000, it’s essential to insure them for that higher value or take out a separate insurance policy for your high-value items. 

Documenting everything you own helps you understand their worth. This information guides your decision on personal property coverage and proves useful when filing an insurance claim. 

How to file a contents insurance claim 

The process for filing a claim is generally similar for both tenant and home insurance. You’ll first have to contact your insurance company, be it online or over the phone, to file a contents insurance claim. The insurance provider will guide you through the following steps:  

• Inventory document: The insurer will likely request that you take photos of the damage and create a list of affected items. Once you’ve prepared this information, create and submit your claim and receive a claim number. 
• Assessment by an adjuster: An adjuster will visit your home to assess the damage and estimate repair costs. 
• Claim approval and payment: After approval, you will receive payment—either as a lump sum or in multiple checks. For tenant insurance, the compensation is typically for personal belongings. For home insurance, it covers both structure and belongings. 

Contents insurance is important for protecting your belongings from risks like theft and fire. By understanding your policy and keeping an inventory, you can make sure you’re properly covered. Whether you own or rent a home, having this type of coverage will give you peace of mind and financial security.  

Read next: Should you notify your home insurance company if you fix the damage yourself?