Contents insurance is insurance to cover valuable personal property that people have in their homes or apartments, according to Allstate Insurance Company. The coverage includes items such as personal computers, appliances, clothing and jewelry. Contents insurance provides compensation if a fire or other disaster damages or destroys policyholders' property or if someone steals their property. Before purchasing contents insurance, consumers should create property inventories and decide whether to purchase replacement cost or actual cash value coverage.
One of the ways that individuals can create property inventories is by using video cameras to record short descriptions of their significant valuable items, including major appliances, equipment, antiques and furniture, explains Allstate Insurance Company. Inventories help consumers determine how much insurance they need and help them to prove claims when losses occur.
In the event of a claim, contents insurance policyholders with actual cash value coverage receive payment based on the present value of their belongings, taking depreciation into consideration, notes Allstate Insurance Company. Policyholders with replacement cost coverage receive the cost to replace their property with the same kind of item, and depreciation is not a factor. Replacement cost coverage is typically more expensive than actual cash value coverage, but the higher premiums may be worth paying, depending on the nature and value of the covered property.