Factors Affecting Cheap Contents Insurance Premium Costs

There are factors that affect cheap contents insurance. This type of protection covers the items in your home such as furniture, fine dining sets, silverware, jewelry and other items. A home contents insurance policy is usually a rider attached to a home owners policy or can be purchased separately. The term contents insurance is more commonly found outside the United States but the principles of what it covers are part of a standard home owner’s insurance policy.

Premium Calculations

Premium calculations for cheap contents insurance, and for that matter any type of insurance coverage, is based on the amount of risk transferred from the policy owner to the insurance company. The valuations used to determine the replacement of a home’s contents would be the basis for the policy’s benefit amount. Most policies will cover most every item in the home that is listed on an attached schedule.  

Home Contents Schedule

This schedule will provide the insurance company with information regarding the name of the item, its purchase price, present or appraised value or replacement cost. With this information, policy limit will be established for each covered item or home content and the policy will be priced. The higher the value used, the higher the premium that will be charged in order to provide a benefit in the event of loss.

Cheap Content Insurance Benefit Valuation

The policy owner must decide which values they wish to base the coverage on. It is generally understood that a purchased item, such as a dining room table or television set will depreciate over time. This is due to the constant use and wear and tear attributable to it being in the home. Aside from certain appreciable assets that may also be covered such as jewelry or fine art collectibles, using a purchase value over a replacement value will dramatically change the premium structure.

A cheap contents insurance policy will use the lesser valuation for its pricing. If the insurance company is on the hook for the less expensive purchase value of a home’s content, their risk is lower. Using a replacement value for an item purchased 10 years ago, such as a television, will result in a higher policy benefit level and higher premiums.

Setting the Deductible

In addition to the valuation method used, the policy’s deductible is a factor that will impact the premiums. Because insurance involves the transfer of risk from the policy owner to the insurance company, the more risk that is retained by the insured in the form of a deductible, the less expensive the insurance coverage will be. There is less loss exposure to the insurance company for a $50,000 home content policy with a $10,000 deductible than there is for a $50,000 policy with a deductible of $1,000. The higher the loss that the homeowner is willing to take on themselves the cheaper the content insurance policy and the lower the premium.

The factors that affect a home content insurance policy should be considered when purchasing home owners insurance coverage. The consideration of the valuation, loss exposure and deductible will influence the amount of coverage you buy and the price you pay for it in terms of premium.