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Personal property insurance: Are you covered?

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When it comes to insuring your home with a homeowners policy, the first thing that comes to mind may be protecting the home’s structure itself. What’s important to remember, though, is that another crucial part of your home insurance policy is personal property coverage, which extends coverage to the belongings inside your home. This typically includes furniture, appliances, electronics and clothing, and may also include high-value items, like jewelry and artwork.

The personal property coverage on your home is generally a percentage of the overall dwelling limit. However, your policy may have specific limits, so if you need to insure certain high-value items, it may require an endorsement to do so. That’s why it’s so important to understand how personal property coverage works, what the limitations are, and how the value of your items is calculated — whether actual cash value or full replacement cost. Knowing this information is often the best way to ensure you have coverage that fits your needs.

What is personal property insurance?

Personal property insures the contents of your home so that they can be repaired or replaced after a covered loss. Your TV, workout equipment, musical instruments, sports paraphernalia and more all qualify for coverage under your homeowners insurance policy.

Of homeowners property insurance claims filed in 2019, 97.2% were made due to property damage and theft, according to the Insurance Information Institute (Triple-I). This high percentage helps illustrate how important personal property coverage is, as it can lead to thousands of dollars in losses. Because insurers will need evidence of any damages incurred, it is generally recommended that homeowners keep inventory of their items in the event of future claims. In 2020, 43% of homeowners reported that they kept a home inventory.

Because some personal property is valued differently, it may be beneficial to purchase extended coverage limits for items like wedding rings, instruments or artwork. Otherwise, if several high-value items are impacted by a covered loss, your standard home insurance policy may not offer enough coverage to make you financially whole again.

Many home insurance companies offer scheduled personal property coverage as an endorsement, which gives policyholders extended coverage on their more valuable possessions, both in coverage limits and perils. For instance, most scheduled personal property endorsements include open perils, where losses resulting from anything other than specifically stated exclusions are covered.

What exactly does personal property insurance do?

Personal property insurance helps you pay to repair or replace your belongings if they get damaged or destroyed in a covered peril. After you meet your deductible, the insurance company will reimburse you for losses that are covered under your policy.

Homeowners insurance companies offer personal property insurance in different levels of coverage, which is the maximum amount they will reimburse you for a covered loss. When you purchase a policy, you can choose your level of coverage based on the total value of your items. Higher levels of coverage usually mean you’ll pay a higher premium.

Most personal property policies provide coverage for your belongings at 50-70% of your dwelling insurance. However, you could need less or more coverage depending on the value of your belongings.

Learn more: Compare home insurance quotes

What does personal property insurance cover?

Your personal property policy covers all of your personal belongings, wherever you keep them. That includes the interior of your house, yard, shed, car, garage and even in hotels when you travel. However, your items are only protected by covered losses. For example, your insurer likely will not pay out a claim if your lawnmower breaks down or you want to upgrade your refrigerator.

While the basic amount of coverage is sufficient for some people, others might need to boost their coverage for added protection. Before purchasing a personal property insurance policy, figure out how much coverage you need based on the total value of your belongings and where you live. Raising your coverage limit will increase your rate, but it is only a fraction of what it would cost if you had to pay out-of-pocket to replace your items.

Your dwelling and personal property will be covered differently depending on the type of homeowners insurance policy you have. An HO-3 policy covers dwelling on an open perils basis but personal property is covered on a named perils basis. In contrast, an HO-5 policy covers both dwelling and personal property on an open perils basis.

Under the umbrella of personal property coverage are two policy options — open peril and named peril. It is important to understand the differences between these policies and figure out which one makes sense for you.

Open peril policy

An open peril policy covers your personal belongings from any type of accidental damages that are not explicitly written as an exclusion in your policy. For this reason, they are typically more expensive than named peril policies. Some of the situations that an open peril policy would cover may include a kitchen fire that causes stove damage or a storm that destroys plants and landscaping.

Named peril policy

If you have a named peril policy, the insurance company will only cover certain losses that are specifically stated in your insurance policy. Named perils usually include coverage for damage caused by things like:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism
  • Theft
  • Volcanic eruption
  • Falling object
  • Weight of ice, snow, or sleet
  • Accidental water overflow or steam
  • Sudden and accidental tearing apart, cracking, burning, or bulging of certain household systems
  • Freezing
  • Sudden and accidental damage from artificially generated electrical current

For either policy, you will need to determine the dollar amount of how much coverage you need. That will depend on the value of your items, where you live, how much risk you’re willing to take and the amount you can afford to pay if you had to replace your items.

Things to consider

When you file a claim for a covered loss, your insurance company will pay you after you have met your deductible. However, the amount of money you get is dependent on how your insurance policy calculates reimbursement. This is where actual cash value (ACV) versus replacement cost value (RCV) comes into play.

An ACV policy factors in depreciation when determining the value of your items. For example, you may have purchased a laptop five years ago for $1,000, but it is now worth $500 because it has depreciated, or lost value, over time. In the event of a covered loss, the insurance company would reimburse you $500 for that laptop. Most standard homeowners policies (HO-3) use ACV as the default option.

On the other hand, an RCV policy doesn’t factor in depreciation. The insurance company will pay to replace your damaged or destroyed items based on their current market value, up to your policy limit.

How much should I expect to pay for PPI?

Personal property coverage is almost always included on standard homeowners insurance policies. As of 2021, the average cost of homeowners insurance is $1,393 per year for $250,000 in dwelling coverage. Depending on your home’s location, its age and coverage limits, your premium may be more or less than the national average.

For instance, the default coverage level might be too low for your personal belongings, especially if you own valuables. If you have jewelry, art, furs, collectibles or pricey electronics, it is a good idea to consider an enhanced policy, which will raise your annual premium.

Additionally, your insurance rate will vary based on whether you have an ACV or RCV policy. Remember that ACV policies are usually the default option for standard homeowners (HO-3) policies and are cheaper. You can choose to change your policy to RCV, but you’ll pay more.

While your homeowners insurance might be expensive, there are ways you can save money on your premium. Here are some things you can do to lower the price of your personal property coverage:

  • Upgrade your home: If you own an older home, you can expect to pay more for your homeowners insurance. Old homes tend to be more likely to have claims. To possibly save money, you can upgrade your appliances, replace the roof or install safety equipment like a security system.
  • Improve your credit score: People with low credit-based insurance scores tend to have higher homeowners insurance premiums. If you raise your credit score, your insurance provider might lower your annual rate.
  • Avoid filing claims: Claims tend to make your insurance rate go up. Avoid filing frivolous claims whenever possible. Consider repairing or replacing inexpensive items yourself, even if it costs you a little money out of pocket. Only consider filing a claim when major losses occur that would cost more than your deductible.

Learn more: Affordable home insurance companies

Bottom line

Having personal property insurance is important, and so is having the right type of policy for your needs. Make sure your policy can sufficiently cover your and your family’s personal belongings in the event of a loss. Decide how much you can afford to pay out-of-pocket to determine your coverage level and which kind of policy you choose.

Personal property coverage is an added cost, but it could save you thousands of dollars or more in the long run.

Frequently asked questions

Methodology

Bankrate utilizes Quadrant Information Services to analyze 2021 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on 40-year-old male and female homeowners with a clean claim history, good credit and the following coverage limits:

  • Coverage A, Dwelling: $250,000
  • Coverage B, Other Structures: $25,000
  • Coverage C, Personal Property: $125,000
  • Coverage D, Loss of Use: $50,000
  • Coverage E, Liability: $300,000
  • Coverage F, Medical Payments: $1,000

The homeowners also have a $1,000 deductible and a separate wind and hail deductible (if required).

These are sample rates and should be used for comparative purposes only. Your quotes will differ.

Written by
Cate Deventer
Insurance Writer & Editor
Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent.
Edited by
Insurance Editor