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Personal property coverage is included on a standard homeowners insurance policy and is the portion that provides coverage for your personal belongings, including furniture, electronics, jewelry, clothing and appliances. The personal property coverage on your home policy 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, you may seek additional coverage. Bankrate’s team of insurance experts explains how personal property coverage works so that you’re adequately covered.
What is personal property insurance?
Personal property insures the contents of your home so that they may be repaired or replaced after a covered loss. Your TV, workout equipment, musical instruments, sports paraphernalia and more may all qualify for coverage under the personal property coverage of your homeowners insurance policy.
Certain high-value items, like jewelry, artwork and other valuables, may have limited coverage in the personal property coverage of a home insurance policy. Many home insurance companies offer a scheduled personal property coverage endorsement to fully insure these items, which gives policyholders extended coverage on their more valuable possessions, both in coverage limits and perils. For instance, most scheduled personal property endorsements cover property on an open perils basis, where losses resulting from anything other than specifically stated exclusions are covered. Personal property coverage on renters insurance policies typically works the same way as homeowners insurance personal property coverage.
Keep in mind that in homeowners insurance, personal property insurance is for items for your personal use only. If you run a business in your home, you may need a separate business personal property insurance.
How does personal property insurance work?
Personal property insurance may help you pay to repair or replace your belongings if they are damaged or destroyed by a covered peril. After you meet your deductible, the insurance company will help pay for losses covered under your policy up to your coverage limit.
Homeowners insurance companies offer personal property insurance in different levels of coverage, which is the maximum amount they will pay after 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 insurance covers your belongings at 50-70 percent of your dwelling insurance. However, you might need less or more coverage depending on the value of your belongings.
What does personal property insurance cover?
Your personal property coverage extends to all of your personal belongings, wherever you keep them, with some limitations. This includes the interior of your house, yard, shed, car, garage and even in hotels when you travel. You’ll have lesser coverage if you have items that are permanently stored away from your primary residence, such as in a garage unit. However, your items are only protected from covered losses. For example, your insurer will not pay a claim if your lawnmower breaks down or you want to upgrade your refrigerator.
While standard coverage may be sufficient for some people, others might need to boost their coverage for added financial protection. To determine how much personal property insurance to purchase for your policy, most insurance professionals recommend figuring out how much coverage you need based on the total value of your belongings and where you live.
Insurers will cover your dwelling and personal property 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.
Open perils policy
An open perils 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 perils policies.
Named perils policy
If you have a named perils policy, the insurance company will only cover certain losses that are specifically stated in your insurance policy. Named perils usually cover the following 16 sources of damage:
- Fire or lightning
- Windstorm or hail
- Riot or civil commotion
- 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
- 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 likely depend on the value of your items, where you live, how much financial risk you’re willing to take and the amount you can afford to pay if you had to replace your items.
ACV vs. RCV
When you file a claim for a covered loss, your insurance company will pay for covered damages after you have met your deductible. However, the amount of money you get depends 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 less your deductible.
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 minus your deductible. Most standard homeowners policies use ACV as the default option, while the HO-5 policies may use RCV.
How much does personal property insurance cost?
As of 2023, the average cost of homeowners insurance is $1,428 per year for $250,000 in dwelling coverage. Depending on your home’s location, age, coverage limits and other personal rating factors, your premium may be more or less than the national average.
Additionally, your insurance rate may vary based on whether you have an ACV or RCV policy. Remember that ACV coverage is usually the default option for standard homeowners (HO-3) policies and are typically cheaper. If your insurance company offers an RCV option or you’ve added an endorsement for scheduled personal property, your home insurance may be more expensive. However, the higher premium could be worthwhile to reduce your out-of-pocket risk in the event of a covered loss if you have high-value items like art, musical instruments or high-tech gear.
While your homeowners insurance might be expensive, there are ways you may be able to save money on your premium. Here are some steps that might lower your premium.
- Maintain your home: Old homes are generally more likely to have claims than newly-built homes, which may make insurance premiums more expensive. To reduce the chance of claims, you might replace the roof when needed, fix broken stairs or pavement 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 in states that permit credit as a rating factor. If you raise your credit score, your insurance provider might lower your annual rate.
- Avoid filing claims: Generally, claims increase insurance rates. Some insurance experts recommend avoiding filing frivolous claims when possible. This could include repairing or replacing inexpensive items yourself, even if it costs you a little money out of pocket. Speaking with a licensed insurance agent may provide you more context on what damages warrant a filed claim.
- Bundle with your auto insurance: One of the best home insurance discounts may be earned by bundling your home and auto insurance with the same carrier. This usually results in a discount on one or both policies.
Frequently asked questions
In general, personal property insurance includes coverage for the same types of losses covered under a standard homeowners insurance policy. Standard homeowners insurance policies typically cover losses caused by a number of common perils, including theft, vandalism, windstorms, fire, smoke, lightning, hail, weight of ice and snow, explosion and more. However, the specifics of your personal property insurance coverage will depend on your policy and related exclusions.
Typically, personal property insurance is a percentage of your home insurance policy’s dwelling coverage limit. Taking inventory of your belongings and estimating the cost to replace these items could help you decide if you need to increase your personal property coverage. Asking your homeowners insurance agent about the policy limit for expensive items may help you understand if you need to add an endorsement for scheduled personal property.
Replacement cost is calculated by estimating the current market value for your items without considering depreciation. As the payouts for losses are typically higher when you have replacement cost coverage, these policies are generally more expensive than actual cash value policies. When shopping for home insurance, you can ask insurance carriers about the type of personal belongings that are covered, the method in which the value is calculated, and other related details to make a decision that’s best for your needs.
Both personal property insurance and contents insurance refer to coverage for your personal belongings like clothing and furniture or other items, and are often used interchangeably. However, you’re more likely to see personal property listed as “contents coverage” on renters insurance policies.