What is Personal Property Insurance?

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When you buy a homeowners insurance policy it comes with several protections, including personal property insurance. Sometimes called contents coverage or contents insurance, personal property coverage safeguards your belongings and is a valuable part of your home insurance policy.

Personal property insurance is part of a standard homeowners insurance, renters insurance, or condo policy and is known as Coverage C. It protects your belongings (aka the items inside your house). The amount of personal property coverage a policy provides can vary depending on the insurer, but in general, it is a given percent of how much dwelling coverage you carry. Dwelling insurance, known as Coverage A, protects the physical structure of your home. Thus, if you carry $250,000 worth of dwelling coverage, and your personal property is set at 50% of that amount, then you’d have $125,000 in protection.

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Personal property insurance covers the belongings in your home including furniture, clothing, appliances, and the like. If your belongings are damaged or stolen as the result of a covered peril, then the insurance company will pay to repair or replace those items up to the limit outlined in your policy for this coverage. There is usually a deductible included, which is the amount you pay for the loss before the insurance company will pay.

Personal property insurance coverage can also extend to belongings that you keep in your car or take on vacation. Your policy may also apply to possessions owned by friends or family that are in your home, such as a borrowed musical instrument. If it’s stolen during a break-in and the owner’s own insurance doesn’t cover it, you may have coverage under your homeowner’s insurance policy to recoup the loss, in addition to any of your own items that were stolen or damaged.

Claims for personal property usually are covered as long as the cause of loss is a named peril, which means it is listed in the policy. A few examples of named perils are:

  • Fire
  • Smoke
  • Lightning
  • Hail
  • Windstorms
  • Theft
  • Vandalism

Some companies have an optional endorsement you can include which changes personal property insurance to an open peril, or all risk, coverage. This means that unless the cause of loss is excluded, it could be covered.

What Doesn’t Personal Property Insurance Cover?

There are some things that personal property insurance doesn’t cover including pets and automobiles. Personal property insurance also won’t apply in certain circumstances, such as losses caused by flooding. If you have boarders, roommates, or tenants living in your home, their belongings won’t be covered under your homeowners insurance policy, either. They should check into getting their own personal property insurance to cover their belongings in your home.

Valuable items, like jewelry, firearms, cameras, and laptops, may only have a small amount of coverage under your homeowners policy. For instance, you may only have up to $1,500 in jewelry coverage for loss by theft. There are other specific items that may have special limits of coverage as well. If you want additional coverage for such items, you’ll need to buy additional protection called scheduled personal property coverage.

It’s important to review your policy carefully to know what’s covered and not covered as well as any limitations there might be on coverages and claims.

When you file a claim for personal property loss, the insurance company will pay to repair or replace your affected items in one of two ways: actual cash value (ACV) or replacement cost value (RCV). Most companies default to ACV but give you the option to cover your personal property with RCV. Some automatically include personal property settlement as RCV.

What Is Actual Cash Value (ACV)?

Actual cash value reimburses the cost of your personal property, less depreciation and normal wear and tear. For example, let’s say you bought a couch for $1,000 four years ago. If you were to file a claim for the couch damaged in a covered loss with ACV, the insurance company will deduct depreciation and only give you the value of a four-year-old couch. If the depreciation value is 10% per year, then you’d only get $600 to replace the couch. Your policy deductible will further reduce the settlement amount.

What Is Replacement Cost Value (RCV)?

With replacement cost value, your personal property is covered based on today’s value. Using the same $1,000 couch you bought four years ago example, you’d be reimbursed for the cost to replace the couch with similar quality and type of couch. There is no depreciation calculation with replacement cost value, though you are still subject to the deductible reducing the total amount received in the loss settlement.

Yes, your personal property insurance covers valuables like jewelry, but there is typically a limit per claim, called a sublimit. If someone breaks into your home and steals multiple pieces of jewelry valued at $5,000 and your home insurance has a $1,500 sublimit for such losses, the most your insurance company would pay is $1,500, minus your deductible.

If you own valuables like jewelry, fine art, firearms, and certain collectibles, there may be a better solution. Many carriers offer what is known as scheduled personal property coverage, either as an endorsement to your homeowners policy or as a separate policy. When you insure a valuable item under scheduled personal property, it’s insured for its total value. Insurance companies typically want photos of the items and an appraisal or expert evaluation per item to prove the value. You may have a deductible for this coverage, depending on the carrier.

How much personal property coverage you need depends on the type of belongings you have, how much you have of it, and the value of all your items. The best way to value all your personal property is to take an inventory of your home.

  1. Take detailed photos or videos of each room in your home. If you’re shooting a video, don’t forget to describe each item and its value as you see it.
  2. Create a list of all your valuable possessions, like furniture. Give a value to each item and write down identifying details, such as serial numbers, the age of the item or year you bought it, and makes and models for computers and other electronics. Attach receipts or valuation documents like appraisals whenever possible.
  3. For smaller or bulk items like kitchen utensils, shoes, and clothes, give a total figure.
  4. Once you’re done, add up all the values and round them up to the nearest $5,000 or $10,000. This is the minimum personal property coverage you need. 

If that figure exceeds the amount of protection that your home insurance policy already provides, you may want to purchase additional coverage. Speak with a licensed insurance agent or call your insurer if you have questions about your policy.

When referring to homeowners insurance, personal property coverage is usually the term used. Contents insurance or contents coverage typically refers to renters insurance, where dwelling coverage is not included. However, the two terms are used interchangeably and both mean insurance coverage for your personal property, belongings, or contents in your home or apartment.

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