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Personal property coverage provides protection for your stuff inside the home against theft and damage, but it can also protect your belongings outside the home.
Personal property coverage is the part of your home insurance policy that covers your clothes, electronics, portable appliances and anything else in your home or other structures on your property against damage or theft. The damage or destruction your property is protected against depends on what perils your policy covers.
Your policy also dictates what items it will and won’t cover, and may only cover certain kinds of personal property up to a specified coverage amount and luxury items like expensive jewelry can be refused if you don’t increase your coverage limits or add coverage.
Read on to learn more about property insurance:
The personal property insurance market can be broken down into two major categories: personal insurance and commercial insurance.
Commercial insurance is coverage designed for businesses, and accounts for around half the personal property insurance industry premiums, according to the Insurance Information Institute.
For this guide, we’ll be focused primarily on the personal property coverage in your homeowners insurance policy. Although many of the same concepts, terms, covered perils, and types of personal property covered in a homeowners insurance policy is also covered in a businessowners policy.
Personal property insurance covers your belongings inside the home, on the patio, or in the garage if the damage or theft to the property is protected against a covered loss like fire, lighting, wind damage, or theft. However, your policy won’t cover your air-conditioning unit or oven if they just stop working one day because of a mechanical failure or wear and tear; that requires a separate type of property coverage called warranty insurance.
Here’s a rundown of the different types of personal property that’s covered in a typical homeowners insurance policy:
Indoor and outdoor furniture
A typical homeowners insurance policy may include coverage for jewelry and other precious items and they’ll be covered against all the perils included in your policy. However, there are special circumstances where the insurer has a low limit of liability – the amount they’re responsible for covering – for theft of jewelry, and that amount is generally around $1,500.
Insurers are selective in their coverage limits of jewelry because of how targeted it is by burglars and how relatively easy it is to steal. If every jewelry theft claim was met with a pay-out of its replacement value, insurance costs would skyrocket.
If you own precious metals or expensive keepsakes that are difficult to replace, you have a couple of options to increase your coverage:
Raise the liability limits: This is probably the cheapest jewelry coverage option, but the amounts that are paid out to cover your losses are still pretty low. For example, item limits are still only about $2,000, and the overall limit for multiple stolen items may only be about $5,000.
Purchase a floater or personal property endorsement: This option is a little more pricey than simply increasing property theft liability limits, but it offers the best and broadest protection for your most expensive valuables. The great thing about floaters is they cover losses of any type, including perils your homeowners insurance policy won't cover, even accidental losses! That means if your wedding ring falls into the gutter and is bound for a lifetime in municipal sewage, your special endorsement coverage will help you pay for a new one.
Trees, plants, shrubs, and foliage are also covered under a standard homeowners insurance policy – generally about $500 per item. However, trees and plants are not covered for disease if they were poorly maintained.
Did you know that personal property coverage may also be extended to personal property losses that occur outside the home? That means belongings in your car, storage unit, or literally anywhere in the world are covered.
It's common for companies to cap the coverage amount for outside-the-home losses at around 10% of your personal property insurance limit. While that may seem like a small amount, if your personal property coverage is set at $200,000, that’s still $20,000 in coverage for stuff in your trunk or VRBO.
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Determining the amount of personal property coverage you need depends on the value of everything you own. Your coverage limit is set based on the cost of new, replacement items if everything in your home was destroyed, and that’s the maximum amount paid out to you when you file a claim.
Take an inventory of every last thing you own, and either look up or estimate the current price of each individual piece of property. The total is the amount of insurance you would need to replace the contents of your home with brand new stuff.
Every policy has limits for each component, including your personal property, that may be higher or lower than the amount of coverage you actually need. The coverage limit is typically shown on the contract’s declarations page in the first part of the policy.
Most insurers calculate your personal property coverage as a percentage of your dwelling coverage – about 50% to 70%. Where things get contentious is when the percentages aren’t enough to cover all your things.
For instance, if your dwelling coverage is $200,000 but you have $150,000 in personal property that needs coverage, you’ll be underinsured by almost $10,000, and that’s only if your insurer’s personal property coverage limit is on the higher end. Personal property coverage that’s 50% of your dwelling coverage would leave you underinsured by almost $100,000.
If you think your personal belongings are underinsured, or have questions about what to do if they are, talk to one of our licensed experts at Policygenius who’ll walk you through steps to take to insure all of your valuables.
There are two distinct types of coverage options that determine how much you get from your insurance company to cover for losses to your home or personal property. Claim payments can be based on your properties’ replacement cost value (RCV) or actual cost value (ACV).
As with dwelling insurance, replacement value for your personal property pays you what it would cost to replace whatever was damaged or destroyed without any deductions and consideration for the item’s condition. An actual cash value pays for the loss, but it deducts the depreciation amount from the replacement item’s current market value.
Personal property costs generally depend on the type of stuff you own and whether or not it requires limit increases and additional insurance, like floaters or a personal property endorsement. If you collect art and vintage jewelry for a living, you may want to look into separate, more comprehensive policies that your standard homeowners insurance may not be adequate for.
It also depends on whether you have an ACV or an RCV policy. ACV policies may have lower premiums and save you money in the short term, but will cover a smaller percentage of your stuff if it’s old and depreciated, costing you more in the long run. On the flip side, RCV policies have higher premiums, but will replace even your most dusty, decrepit belongings with new ones if they were damaged by a covered loss.
More broadly, you’ll want to consider your deductible, which is the amount you pay to your insurer after you file a home insurance claim. The general rule of thumb in insurance affordability is, the higher your deductible is – the lower your premiums will be; the lower your deductible is – the higher your premiums will be.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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