What Does Personal Property Insurance Cover? A Complete Review

Personal property coverage, a pivotal component of your home insurance, safeguards a spectrum of belongings within your dwelling, ranging from linens and furnishings to electronic devices.

Its protective scope extends globally, encompassing possessions situated in diverse locales, including hotel rooms and vehicles.

Nonetheless, certain restrictions and exceptions govern personal property coverage, necessitating a comprehensive grasp of its operational dynamics.

Henceforth, we delineate the mechanisms underlying personal property coverage and offer insights to ascertain the adequacy of your coverage.

What does personal property insurance cover
If your belongings are damaged or stolen due to a covered peril, the insurance company will pay to repair or replace them up to your policy’s limit. Personal property insurance is typically included in standard homeowners and renters policies: Image source (Indeed)

What is personal property coverage?

Personal property coverage financially protects you if your belongings suffer damage or theft. For instance, if a fire were to burn down your home, you would receive compensation for the value of your damaged belongings along with the property. However, the policy sets limits on what – and how much – it covers.

What is covered under personal property insurance?

Basically, all the contents of your home that aren’t part of the actual dwelling structure are covered by personal property. That includes:

  • Furniture
  • Clothing
  • Appliances (fridge, dishwasher, washing machine and dryer)
  • Electronics (stereos, televisions, computers)
  • Home décor (rugs, window treatments)
  • Dishes
  • Other valuables (jewelry, wine and spirits, artwork), often with coverage limits
  • Sporting goods

These items are also often protected outside the home as well. For example, if you had some of your belongings inside your car that were stolen, your personal property insurance will cover it.

There are special limits on certain types of personal property. They may be covered at limits of $2,500 or less. These include:

  • Jewelry, such as engagement rings or luxury watches
  • Expensive artwork
  • Fine wine or spirits
  • Musical instruments
  • Firearms
  • Collectibles, such as baseball cards or stamps

For many of these items, you can extend coverage with an endorsement.

What is a personal property endorsement?

A scheduled personal property endorsement increases the personal property coverage amount beyond what your standard homeowners or renters policy includes.

For instance, if you own a collection of fine jewelry or one-of-a-kind artwork worth $20,000, they could leave you vulnerable if someone steals or damages them, as most policies cap coverage at a maximum of $2,500. By purchasing a personal property endorsement for these high-value belongings, you can ensure they cover the full value in the event of just about any peril.

“If you have items worth more than $1,500, you really need to look at … buying a specific policy for them,” says John Williams, an agent with Farmers Insurance in Colleyville, TX. “It’s pretty affordable and provides additional coverage.”

You can also choose to purchase a standalone policy called a floater that insures a specific item. Either way, the item will be insured for its appraised value; you will need to provide an appraisal.

Personal property insurance doesn’t cover what?

There are a few exclusions to your personal property insurance, on top of the limits on high-value items.

Personal property coverage excludes:

  • Pets
  • Motorized vehicles and watercraft
  • Property owned by a tenant in your home
  • Business property

How does personal property coverage work?

Standard home insurance policies cover personal property at actual cash value (ACV). You can also choose to upgrade your coverage to replacement cost value.

“ACV takes depreciation for condition and age into account, while RCV pays to replace the property with like kind and quality,” Williams says.

Actual cash value

This takes into account the cost of replacing your items, minus depreciation. Actual cash value takes the current replacement cost of the item new and subtracts depreciation. Let’s say you bought a TV new for $1,000, but it’s now four years old, and the insurance company calculates that it has lost $400 in depreciation. A similar TV new would cost $1,200 today. With an ACV policy the calculation is:

Replacement cost – depreciation = covered amount.

In this case that’s $1,200 – $400 = $800.

Replacement cost

You can choose to upgrade your personal property coverage to replacement cost for a small extra premium. With this type of coverage, you would get $1,200 for your TV in the example above, to buy a new one at today’s replacement cost.

Read more: What is FDIC insurance for business accounts?

What are the coverage limits for personal property insurance?

Personal property coverage typically ranges from 50-70% of the dwelling coverage. For example, with a $300,000 policy, your personal property coverage would be $150,000 to $210,000. Off-premises item coverage is limited to 10% of the dwelling coverage.

How to calculate how much personal property insurance you need

One of the most important things to consider is how much your property is worth. It can help to itemize all your possessions and come up with an estimated value for each, then total it all for an overall value.

“Lyle David Solomon, a financial attorney and principal at Oak View Law Group, recommends opting for a replacement cost policy and scheduling your most valuable possessions to ensure full compensation for everything lost. If you’re on a tighter budget, you should consider cash value coverage, which offers a much cheaper monthly rate.”

How does a personal property coverage claim work?

When your property sustains damage, your initial step is to report it and obtain documentation for the insurance company. For instance, in the event of fire damage to your belongings, you’ll require a report from the fire department. Similarly, if theft occurs, contacting the police and filing a report is necessary.

According to Solomon, reimbursement is unlikely without proper documentation. Additionally, compiling an inventory of lost items is essential. Solomon advises proactively inventorying your property to facilitate documenting losses more efficiently.

Once you’ve assembled your documentation, contacting your insurance company to file a claim is imperative. Your deductible will be deducted from the final settlement.

Is personal property insurance worth it?

While many people think that they don’t own anything of value, when you consider the cost to replace everything you own, it’s actually a large number. Personal property insurance is included as part of standard homeowners insurance policies for good reason, and it’s well worth the cost.

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