Most homeowner’s insurance policies include personal property coverage, which is a type of coverage for your personal belongings. If your clothing, furniture, or electronics are damaged in a fire or stolen, your personal property coverage may be able to cover the cost of replacing them.
Overview of How Personal Property Insurance Works
Personal property coverage is included in several different types of insurance policies intended for various types of residences.
However, all forms of personal property insurance are intended to help cover the cost of repairing or replacing lost or damaged personal items from covered events, such as fire, theft, or vandalism.
Insurance companies may use one of two ways to determine the settlement amount for personal property claims. They may use the replacement cost or the actual cash value.
The replacement cost is the cost of the item if purchased new at the time the claim is filed. The actual cash value is the cost of replacing the item after accounting for depreciation.
Most insurance policies also include a limit on the amount of coverage, such as $100,000. However, the limit is likely to vary depending on the type of insurance that you have.
Homeowner
Many homeowner’s insurance policies include personal property coverage. The amount included is often equal to a specific percentage of the dwelling coverage, such as 50% of the coverage limit.
For example, if you have a dwelling limit of $250,000, your homeowner’s policy may also include $125,000 in personal property coverage. You may also be able to increase the limit of the personal property coverage to ensure that it covers your assets.
Renter
Renters insurance policies may include the ability to get personal property coverage. The amount available may range from a few thousand to $500,000.
Condo Owner
Condo insurance policies may also include personal property coverage with limits up to $500,000. As with homeowner’s insurance, the amount available may also depend on the dwelling coverage limit.
What Does Personal Property Insurance Cover?
Personal property insurance covers the loss of your belongings. This may include:
- Clothing
- Jewelry
- Electronics
- Furniture
- Decorations
- Tools
- Musical instruments
- Art and collectibles
Most personal property coverage options include coverage for specific events. Coverage is typically for damage or loss due to fire, theft, and severe weather, but not flooding. Flood coverage is often offered separately.
For example, if your clothing and electronics are damaged by fire or stolen, you may be covered. However, if these items are damaged during a flood, you may need to cover their replacement yourself.
Understanding Sub-Limits for Personal Property
Some insurance companies set sub-limits for specific categories of items. You may only be able to obtain coverage up to a certain limit for various high-value items, such as:
- Cash
- Gold
- Firearms
- Furs
- Precious stones
You may also have a sub-limit on watercraft, trailers, and property that you use primarily for business purposes.
Understanding Scheduled Personal Property
Your insurance company may let you schedule an item. This involves adding a specific personal belonging to your insurance policy. Scheduling an item is typically used as an option for covering an item with a value that exceeds the sub-limit.
Keep in mind that scheduling an item means adding more coverage, which is likely to increase your premium payments. However, it also ensures that you have enough coverage for your most expensive items.
In some cases, you need to submit an appraisal to verify the value of the item that you want to add to your policy. The requirements vary from insurer to insurer.
The bottom line is that personal property coverage is an essential part of a homeowner’s, renters, or condo insurance policy. It covers the loss of your personal items, which is something that you don’t want to overlook when choosing an insurance plan that fits your needs.
The amount of coverage that you get should help cover the total value of your personal property. Conducting a thorough home inventory can help you get a more accurate estimate of the worth of your belongings. Use this figure to ensure that your personal property coverage is adequate should you lose all your belongings in a fire or other covered situation.
