- Personal property coverage protects a homeowner’s personal belongings up to the overall maximum coverage limit, but there are sub-limits for each category of property.
- The covered perils for personal property damage may differ from the covered perils for dwelling and other structures coverage.
- There are additional personal property coverage options available to fully cover higher-value items and better protect a homeowner’s personal belongings than a standard policy.
Personal property coverage C: what is covered?
Personal property insurance covers various personal belongings of the homeowner. Items included in this coverage are items such as furniture, electronics, jewelry, art, clothing, firearms, appliances, rugs, dishes, etc
The values of these personal belonging will be reimbursed up to the maximum coverage limit to the homeowner for any covered peril in the policy.
Perils typically covered under section C include:
- Fire or lightning
- Wind or hail
- Theft or vandalism
- Sudden and accidental water damage
- Volcanic eruptions
- Falling objects
- Weight of ice, snow, or sleet
It is important to note that the perils covered under the personal property insurance section of a home insurance policy may differ from the perils covered under the dwelling and other structures insurance sections. There are two forms of perils coverage, named perils and open perils. The named perils basis covers any peril that is specifically included in the policy and will exclude all perils not listed in the policy, whereas, the open perils basis will cover all perils that are not explicitly excluded in the policy. In the standard HO-3 form of homeowners insurance, dwelling, and other structures coverage are on an open perils basis and personal property insurance is on a named perils basis.
If you want your personal property to be covered on an open-peril basis, ask your insurance provider to upgrade your policy to an HO-5 form of homeowners insurance. HO-5 policies include all peril protection for personal property coverage C except for the exclusions listed in the policy document.
What is not covered by personal property insurance?
There are some personal belongings of a homeowner that are not covered under section C of a standard home insurance policy. These include belongings such as:
- business property and data
- personal property that is rented out
- credit cards
There are a number of perils that are typically excluded from coverage such as:
- normal wear and tear
- items lost by the homeowner
It is important to read through your policy to see what all is covered or not covered by your personal property coverage. It may be helpful to talk with your insurance agent to determine what coverage you have and what options are available to you.
Personal property insurance coverage limits
The personal property insurance section of a home insurance policy has slightly more complicated coverage limits than that of dwelling or other structures coverage. Not only is there an overall coverage limit, but there are sub-limits for each category of personal belonging.
An example of this could be that the overall personal property coverage in a policy is $5,000 and the sub-limits could be $1,000 for jewelry, $500 for furniture, $1,500 for electronics, etcetera. This means that if $2,000 worth of jewelry is stolen, even if though under the overall section maximum coverage, the homeowner could theoretically be reimbursed for the full amount, the homeowner would actually only be reimbursed for $1,000 because that is the jewelry category maximum coverage limit.
Each policy has different maximum coverage limits for Section C of the policy. There are two different types of reimbursement limits that are normally used: actual cash value and replacement cost value. There are also two add-on coverage options available as well. These include: a personal property floater and scheduled personal property coverage.
Actual cash value coverage limit
The actual cash value coverage limit is the least encompassing from of reimbursement. Actual cash value will reimburse the homeowner for damaged or stolen property up to the maximum dollar amount stated in the policy minus depreciation over time. Each category of item is determined to have a useful life over which it is depreciated. This useful life is used in the calculation to determine what the company will pay out to the homeowner.
Here is an example. Say a homeowner has an actual cash value policy coverage limit and one the homeowner has a computer that is initially determined to be worth $1,000. Three years later the computer is stolen. Let’s say that depreciation says that the computer, after three years, is worth $700. The company will reimburse the homeowner $700 for a new computer in this instance. This is subject to the maximum dollar amount stated in the policy as well.
Because the actual cash value basis is the least encompassing form, it is also the cheapest premium cost for a homeowner.
Replacement cost value coverage limit
Personal property coverage with replacement cost provides the same coverage as the actual cash value form but does not factor in depreciation over time.
Looking at the same example. The computer is initially deemed to be worth $1,000 and three years later it is stolen. The insurance company will reimburse the homeowner $1,000 assuming the dollar amount maximum in the policy is at least this high.
Personal property floater
Personal property floaters can be added on to a policy with the purpose of adding additional coverage for personal property which can “float” to any category of personal property.
Looking back at the example we have been using. Say the homeowner’s $1,000 computer is stolen, but the computer coverage sub-limit in the policy is only $500. Normally the homeowner would be reimbursed for $500, but in this case let’s say that the homeowner had $2,000 personal property floater endorsement on the policy. Now. $500 of that $2,000 could be floated over to the computer category of coverage and be added to the $500 limit, leading the homeowner to be reimbursed for the full $1,000.
Scheduled personal property coverage
Scheduled personal property coverage is an endorsement or rider that can be added to a policy, which can be used to provide sufficient coverage to a “scheduled” or specified item. The homeowner can add additional coverage for one specific high value item to further protect the homeowner if that item is damaged or stolen. It is important to note that each individual high value item would have to be individually scheduled for more coverage. Multiple high value items can lead to large increases in premium costs to a homeowner.
Here’s an example. Say the homeowner has a necklace that is worth $5,000, but the policy limit for jewelry is only $2,000. Normally if damage caused by a covered peril happens to the necklace, the homeowner would be reimbursed $2,000, but if the homeowner had added additional personal property coverage that was scheduled for this necklace, the homeowner would most likely be reimbursed $5,000.
How much personal property do I need?
The answer to this question depends on the coverage you can afford and how much your personal belongings are worth.
Let’s say that you have $25,000 worth of belongings. You will want to try to have $25,000 worth of personal property insurance protection. You will not want to get $50,000 of coverage as you will be paying for coverage that will never be used. On the flip side if the premium cost is too much for you and you can only afford $10,000 worth of protection, you may need to change your spending habits to afford more coverage or just know that you are on the hook for$15,000 worth of damage if something happens. Note that this would be the overall limit. You may still need to add additional coverage through one of the riders above to have sufficient coverage for some high value items that you own.
Itemized home inventory list
Something that will be helpful to determine how much your personal property is worth and how much coverage you need is to create an itemized list of all your personal property and the values for each. This itemized list will also be helpful and may even be necessary when filing a claim for damaged or stolen personal property.
Again, it is important to note that there are separate, lower limits for each category of personal belongings. A common one that is typically not sufficient to fully cover the items owned by a homeowner is jewelry. If you have a number of high-value jewelry pieces, it will most likely be worthwhile to pay for additional coverage for your jewelry through a personal property floater or scheduled personal property coverage.
What types of policies include personal property coverage?
Personal property coverage comes included in the following types of insurance policies:
- Homeowners Insurance. All types of homeowners policies except for HO-1 include persona property coverage. Homeowners insurance covers everything inside the house, its structure, and the personal belongings of the homeowner. It also comes with the loss of use, personal liability, and medical payment coverages.
- Condo or Coop Insurance. Condo insurance only covers the space you own or you are responsible for. In other words, you are only responsible for the space within your walls.
- Renters Insurance. This policy doesn’t include dwelling coverage and only covers personal belongings. Renters insurance only acts as liability and possession coverage.
Personal property insurance can be a tricky coverage. This section of home insurance coverage is particularly important to know how you are covered, to what extent your items are covered, and what perils are covered in the policy. The owner of high-value items will need to be extra vigilant as to their coverage to ensure their high-value items are covered to the full extent that the homeowner wants them covered.