Personal property insurance: What it is and how it works

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Personal Property Insurance

Personal property coverage is one of the major parts of your home insurance policy. It covers everything in your home from your towels and sheets to your furniture and electronics.

It will even cover your property anywhere in the world, such as in a hotel room or in your car. There are some limitations and exclusions to personal property coverage, and it’s important to understand how it works.

Below, we’ll explain how your personal property coverage works and how to make sure you have the coverage you need.

Key Takeaways

Personal property coverage is a standard part of your home insurance that covers your belongings.
The limits of personal property coverage are usually set at a percentage of your dwelling coverage, but some types of property have special limits.
Personal property is covered at actual cash value unless you add a replacement cost endorsement.

What is personal property coverage?

Personal property coverage protects you financially if your belongings are damaged or stolen. For example, if your home were burned down in a fire, you would be compensated for the value of your damaged belongings along with the property. However, the policy limits what – and how much – is covered by the policy.

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 example, if you have a collection of fine jewelry or one-of-a-kind artwork worth $20,000, you could be left vulnerable if they’re stolen or damaged since most policies cap out at a maximum of $2,500 in coverage. By purchasing a personal property endorsement for these high-value belongings, you can ensure the full value is covered in the case 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.

What isn’t covered by personal property insurance?

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

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Insuring your valuables

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.

What are the coverage limits for personal property insurance?

Coverage for personal property is usually limited to 50-70% of the dwelling coverage amount. So if you’re insured for a $300,000 policy, your personal property coverage would be for $150,000 to $210,000. For items off the premises, 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.

“If you want to be sure you can recover everything lost, you will definitely want to have a replacement cost policy and schedule your most valuable possessions in order to be fully compensated if you need it,” said Lyle David Solomon, a financial attorney and principal at Oak View Law Group. “However, if you are on a tighter budget, you should consider cash value coverage, which is much cheaper monthly.”

How does a personal property coverage claim work?

If your property is damaged, the first thing you will need to do is report it and get documentation for the insurance company. For example, if your belongings are damaged in a fire, you will need a report from the fire department. In the case of theft, you will need to call the police and file a police report.

“Without some documentation, you are unlikely to be reimbursed,” Solomon says.

You will also need to file an inventory of what was lost. “It is smart to inventory your property ahead of time, so you can more easily document what is missing or destroyed,” Solomon says.

After you have gathered your documentation, you will want to contact your insurance company and file a claim. Your deductible will be subtracted 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. That’s why personal property insurance is included as part of standard homeowners insurance policies and is well worth the cost.

Frequently asked questions

How much personal property coverage do I need as a renter?

Create a personal property inventory and add up the replacement cost of your belongings as accurately as you can to calculate how much renters insurance you need to protect your personal property.

Does condo insurance cover personal property?

If your condo association has a master insurance policy, it’s likely one that only covers the building and common areas. Your personal belongings are not protected. However, your own condo insurance policy will cover personal property.

How can I insure things that exceed my personal property coverage limit?

If you have certain items that are worth more than your coverage limits, you can schedule a personal property endorsement to cover these specific items. This will add to the total cost of your insurance policy but can be worth it if you own pricey jewelry, art, equipment, etc.

Casey Bond

Contributing Researcher

Casey Bond is a seasoned writer and editor who has covered personal finance for more than a decade. Previously, she reported on money, home and living for HuffPost. She has held editorial management roles at Student Loan Hero and GOBankingRates. Her work has appeared in Forbes, Money.com, Yahoo! Finance, U.S. News & World Report, and more. In 2019, she won a NEFE Excellence in Personal Finance Reporting Award. She is also a Certified Personal Finance Counselor.

On this page

What is personal property coverage?
What is covered under personal property insurance?
What isn't covered by personal property insurance?
How does personal property coverage work?
What are the coverage limits for personal property insurance?
How to calculate how much personal property insurance you need
How does a personal property coverage claim work?
Is personal property insurance worth it?
Frequently asked questions

Guide to personal property insurance

What is personal property coverage?