What is personal property coverage?

What is personal property insurance?

Personal property insurance coverage protects everything you own. It will pay to replace your personal belongings if they're stolen or damaged by a covered peril. It's included with every home insurance policy and is also included with renters and condo owners policies, and isn't generally sold as a separate policy.

It's also sometimes called home contents insurance and covers anything not attached to the house.

Does homeowners insurance cover personal property?

Personal property insurance covers the contents of your home. Anything that isn't part of your dwelling's structure is covered by personal belongings insurance.

Personal property insurance coverage is listed as Part C on your home insurance policy and is set at a percentage of the dwelling coverage. Most commonly, it's 50% of the replacement cost of your home, but in some cases may be higher.

What does personal property insurance cover?

Personal property insurance will cover anything considered the contents of your home; these are the things you would take with you if you moved. Some examples of covered contents include:

Furniture
Clothing
Appliances
Stereos
Televisions
Computers
Artwork (with coverage limits)
Rugs, window treatments and other décor
Dishes
Wine and spirits (with limits)
Sporting goods and toys

In many cases, your belongings are even covered if they're damaged or stolen outside of the home, such as in your car, at work, or in a hotel room.

Certain items with a high value or one that's difficult to put a price tag on are probably not fully covered by standard home insurance personal property coverage. This includes things like fine art or jewelry. You can buy additional coverage for those items in the form of a floater.

Does personal property insurance cover appliances?

Yes, in most cases, appliances are covered by personal property insurance. However, in some cases, built-in appliances may be considered part of the dwelling; this usually applies to air conditioning and other HVAC units.

What is not covered by house contents insurance?

Personal property is not covered for damage or loss due to any peril that the policy excludes. Standard homeowners insurance policies don’t cover floods and earthquakes, for example, so any loss of personal property due to either one won’t be covered. Make sure you know what’s excluded by your policy.

In addition to perils that aren’t covered, specific items are normally excluded. They include:

Pets
Business equipment, including computers
Cars and other motorized vehicles
Mysterious disappearance (except on a floater)

Note that mysterious disappearance refers to any situation in which you don't know what happened to the item; it includes something you misplaced or lost. Mysterious disappearance is, however, covered by most floaters.

How to insure high-value items

Contents insurance places special limits on specific types of high-value property. These include:

Jewelry, such as diamonds, gold, watches, and engagement rings
One-of-a-kind or expensive artwork
Fine wine
Musical instruments
Firearms
Other types of collectibles, such as a coin or baseball card collection

Most policies will only cover these items for between $1,000 and $2,500. You'll find these exclusions in your policy under Section I, Personal Property, Special Limits of Liability.

To cover those items in full, you’ll need a scheduled endorsement. This is also called a personal article floater or a personal articles policy. A floater insures a specific item, like a wedding ring, for its appraised value.

Scheduled endorsement advantages

Although you'll have to pay extra to insure higher-value items and possibly get the items appraised, a scheduled endorsement has its advantages.

These riders cover specified property and establish a "value loss settlement." This means that unless the cause of the loss is specifically excluded in your coverage, the insurer pays the value loss settlement amount in full, even if the property is lost, stolen, or destroyed.

For example, if a ring is insured for its $15,000 appraised value, the insurer pays $15,000 if it's stolen or lost -- with no deduction for depreciation and no deductible.

Another advantage of a scheduled personal property endorsement is that it covers your possessions for perils beyond what’s included in a standard policy. For example, a rider will cover you for a lost item, even if you just misplaced it.

Correctly scheduling personal property

Expert Advice

David Marlett, Ph.D, CPCU

Managing Director of the Brantley Risk & Insurance Center at Appalachian State University, Boone, NC

To protect against under-insuring, some policies include an 'inflation guard' that automatically projects a specified increase in contents value every year.

We asked David Marlett, Ph.D., Managing Director of the Brantley Risk & Insurance Center at Appalachian State University to comment on under- or over-insuring important scheduled items.

Q. What are some common reasons people might under-insure scheduled personal property, such as jewelry, artwork, or other collectibles?

A. Contents insurance is typically set as a percentage of a home’s value. But under-insuring can happen unintentionally when homeowners add a scheduled item such as jewelry or high-value artwork. If the item was appraised years ago and has since appreciated in value, it may not be possible to replace in kind, in the event of a loss.

Sometimes people are willing to accept a degree of under-insurance to save money on their premiums. Since rates are typically based on every $100 in value, insurance costs can be expected to increase the higher an item’s appraised value. A homeowner could accept that an originally agreed-upon value for certain scheduled items is acceptable, even if it means that they couldn’t replace it at the same quality level should a loss occur.

Insurance companies typically prefer that people insure to full value in order to avoid arguments when a claim is made and to secure higher premiums. To protect against under-insuring, some policies include an “inflation guard” that automatically projects a specified increase in contents value every year. States have different rules about this type of coverage, so an inflation guard may not be available in all locations.

Q. What is/are the main disadvantage(s) associated with over-insuring personal property?

A. Over-insuring personal property is not a common problem. Even in the event of a separation or divorce, home insurance policies specify a time period to notify the insurer that the named insured or spouse is no longer residing at a given location.

Cost of scheduled endorsements

As noted above, the cost of an endorsement is based on the value of the insured item. It also depends on the company, where you live, and other factors.

A piece of jewelry, according to GEICO, costs about 1-2% per $100 in value to insure on a floater. So, at the low end, it would cost about $100 a year to insure a $10,000 ring.

How much personal property coverage do I need?

Determining how much personal property coverage you need takes a bit of homework. Homeowners often have more difficulty determining how much personal property insurance to get than with other types of home insurance.

You need enough personal property coverage to replace everything in your home if it is completely destroyed. While people often think of expensive items like electronics and furniture, consider what it would cost to replace everything: towels, dishes, clothes, cosmetics - everything you own.

Personal property coverage is typically set at 50% to 70% of your dwelling coverage amount. So, a policy that has $400,000 in dwelling coverage would have $160,000 in personal property coverage if the amount was set at 40%. But you may need much more than that.

How do you calculate personal property coverage?

If you have homeowners insurance, your personal property coverage amount is calculated as a percentage of your dwelling coverage. That doesn't mean you should accept that percentage as the correct amount.

However, you'll need to do a little more math if you’re buying renters or condo insurance and don’t have a dwelling value to base the property coverage on.

Here are some steps you can take to calculate your coverage.

Go through your home or rental and list out all your items as an inventory. Most insurance companies offer one.
You may want to photograph or video your belongings and keep a copy in a safe place. It may come in handy if you have to make a claim.
Do a rough tally of the value of your items to check and see if they fall within your homeowners or renters insurance personal property coverage limits. You may need to increase your coverage.
Get any high-value items appraised and add floaters as needed.

Expanded homeowners insurance (HO-5 policy) vs. standard coverage (HO-3 policy)

If you find yourself with a lot of items that require a scheduled endorsement, you might want to consider an HO-5 policy. There are a few differences between an HO-3 and an HO-5 home insurance policy.

Standard homeowners insurance, called HO-3, is the minimum coverage requirement when obtaining a mortgage and is the most popular policy. It covers a broad range of property types but offers limited coverage for your personal belongings.

The HO-5 offers increased protection, eliminating many of the limitations of the HO-3 and expanding coverage to include a higher limit for jewelry items and business personal property.

It's important to note that HO-5 underwriting guidelines can be more restrictive and limited to relatively new and/or well-maintained homes in good fire protection districts.

Many items that would require a scheduled property endorsement on the HO-3 are automatically included in the HO-5. For example, replacement cost on home and contents insurance. This coverage is more expensive than HO-3 coverage but is the best choice if you have a lot of high-value personal property.

Personal property insurance for condos

Condo insurance includes personal property coverage as a standard part of the policy. Most condo policies include some coverage for the building, but it's largely covered by the HOA's policy. That makes personal property coverage the largest coverage on the policy.

Unlike home insurance, personal property coverage on a condo policy is not a percentage of the dwelling limit, so you do need to calculate the amount you need. Unless you choose to add replacement cost coverage, condo insurance covers contents for actual cash value with depreciation.

Your H0-6 policy covers loss or damage to your possessions up to the limit you purchase. It also covers personal liability and medical payments. If necessary, you can buy special coverage (a rider) for certain valuables, such as jewelry. This insurance typically covers loss of use after a fire or storm makes your unit uninhabitable.

Personal property insurance for renters

Personal property coverage is the main purpose of renters insurance. Your landlord's insurance does not cover your property. Like condo insurance, renters insurance doesn't use a percentage of dwelling coverage for personal property (there's no dwelling coverage on a renter's policy), so you must calculate how much you need.

Renters insurance reimburses you if your belongings are stolen, damaged or destroyed while in your home and even away from home, with more limited coverage.

Renters insurance personal property coverage is also actual cash value - meaning it's the depreciated amount unless you opt to purchase replacement cost coverage.

Renters insurance doesn't cover your roommate's personal property

A common misunderstanding among renters is that one policy covers everyone who lives in the space. A renters insurance policy only provides home and contents insurance for you and your family living in the unit.

If you have roommates, they'll need their own renters insurance policy to protect their belongings, or you'll all have to agree to purchase one together, with everyone named on the policy.

How to save on personal property insurance

Several factors determine your rate for home and contents insurance:

The amount of coverage
The quality of coverage (replacement cost on contents insurance versus actual cash value, the inclusion of inflation protection, etc.)
Your history of filing claims
Your credit rating
Your deductible
Your location

If you own or rent in an area subject to expensive hazards, such as crime, catastrophic weather or fire danger, your rates are likely to be higher. If your neighbors file frequent claims (even if you don't), your rates may be higher. You may pay more if your home is not well-maintained or is very old or in poor condition. To save on home contents insurance, consider the following three tips:

1. Improve your property

While you can't change your home's location easily, you can maintain or upgrade it. Make improvements that could make your home safer and lower your premiums, such as:

Add storm shutters
Reinforce your roof
Modernize your heating, plumbing, and electrical systems
Add a home security system and/or safe
Install fire sprinkler systems

2. Reduce your personal risk profile

Take steps to become lower-risk to insure, and you'll save money on your premiums. Some ways to improve your insurability include:

Improve your credit score, and when it increases, ask your insurer for a premium reduction.
Keep claims to a minimum. If you filed one in the last 3 to 5 years, your rate may be higher.
Be selective of who you invite to your home to reduce the chances of injury or damage claims against you if someone slips and falls or your dog bites a guest.

3. Compare to save on personal belongings insurance

It's smart to comparison shop and review your homeowners coverage each year. There are many items to consider when buying homeowners insurance, and your current insurance carrier may not be offering the best price.

Ask about discounts for:

Switching insurers
Staying with your current insurer
Bundling your policies,
Increasing your deductible,
Retirement
Your profession (teachers, doctors, and more).

How do personal property insurance claims work?

Personal property insurance claims are just like any other type of homeowners insurance claim.

Contact your home insurance company about the claim. The insurer may ask you to take photos if there’s damage. Share any receipts for the items.

If the insurance company approves the claim, the insurer will estimate the cost to repair or replace the item or items. The estimated amount will vary depending on whether you have actual cash value or replacement cost coverage.

Here are the differences between actual cash value and replacement cost value:

Actual cash value. The insurer pays you for the depreciated value of the item. This is calculated as a percentage of the purchase price for every year since it was new.
Replacement cost. The insurance company reimburses you for the cost of replacing the item brand new at current prices.

As with all claims, you can appeal the valuation of your items if you don’t agree.

How to find the best personal property insurance

Since you don't buy personal property insurance as a standalone policy, you need to shop for it as part of a home insurance package policy. Our best home insurance companies ranking is a good place to start.

As you compare policies, look for companies that offer higher limits or replacement cost coverage at a lower cost. Remember that personal property coverage is only part of the policy and be sure to review all of the coverage to ensure the entire policy meets your needs.

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