Personal property insurance: What it is and how it works

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Your home is much more than four walls and a roof. It’s also your stuff – furniture, clothes, electronics, appliances and more – which can be personally and financially devastating to replace. That’s why most renters and home insurance policies include personal property coverage. Read on to learn how this insurance coverage works and make sure you have enough.

What is personal property coverage?

Along with dwelling 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 (knock on wood), you would be compensated for the value of your belongings that were damaged along with the property. However, there are limits to what – and how much – is covered by the policy.

For example, certain high-value items are usually excluded from standard personal property coverage, or only covered up to $1,000-$2,500. That can 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
Pets, such as fish or birds

However, that doesn’t mean you’re out of luck if you own these types of belongings and want to insure them against damage. That’s where a personal property endorsement comes in.

Key Takeaways

Personal property insurance is usually included with standard homeowners and renters insurance policies and covers your personal belongings – even if they’re damaged outside of your home.
Not all types of property are covered, and coverage limits are usually capped at around 40% to 70% of the home’s overall insured value.
If you own particularly high-value items, you might want to purchase a separate personal property endorsement, which increases the coverage limits.
It’s important to know the difference between replacement cost (the amount you’d need to replace your item at today’s prices) and actual cash value (which factors in depreciation).
Always check your insurance policy for exclusions.

What is a personal property endorsement?

Also known as a personal article floater, this 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 (you can check “Section I, Personal Property, Special Limits of Liability” of your policy to find out what is specifically excluded.)

“If you have items worth more than $1,500, you really need to look at … buying a specific policy for them,” Williams said. “It’s pretty affordable and provides additional coverage.”

The amount of coverage you need, and the added cost of including this endorsement on your policy, will depend on the estimated value of your property. That can be a bit tough to determine, so you may want to consult with a professional appraiser.

Once you determine the value of your belongings, a “value loss settlement” is established. That’s the amount of money your insurance company will pay out if you file a claim for your items. Though the cost depends on many factors, you can expect a personal property endorsement to cost an extra $25 to $1,000 per year.

Types of personal property coverage

When it comes to how you are reimbursed for personal property claims, you have two choices when setting up your policy. Those are replacement cost value (RCV) and actual cash value (ACV), explained John Williams, an agent with Farmers Insurance in Colleyville, TX. “ACV takes depreciation for condition and age into account, while RCV pays to replace the property with like kind and quality.”

Below is a closer look at what these two terms mean.

Replacement cost

If you choose a replacement-cost value policy, the insurance company will pay you the current cost of replacing or repairing the item at today’s prices. For example, if your leather sofa was destroyed by a covered incident, you would receive the amount of money needed to buy a new, similar couch. This tends to be the pricier option.

Actual cash value

Alternatively, you can be covered for the actual cash value of your belongings. This takes into account the cost of replacing your items, minus depreciation. So if you bought your sofa for $1,000 a few years ago, but it’s now only worth $250 due to age and wear and tear, you would receive $250 from the insurance company.

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 and it was stolen, your personal property insurance should cover the cost of replacing them.

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What are the coverage limits for personal property insurance?

Keep in mind that coverage for personal property is usually limited to 40-70% of the overall homeowners policy amount. So if you’re insured for a $300,000 policy, your personal property coverage would be for $120,000 to $210,000. However, if an item is lost, stolen or damaged outside of the home, you may only be protected up to 10% of the value.

Personal property insurance cost

Since personal property coverage is included in a standard home insurance policy, there’s no way to individually price it out. Instead, you should shop around for an affordable homeowners insurance policy with adequate coverage for your needs.

Currently, the average home insurance rate is about $2,305 per year. However, that figure can be more or less depending on coverage amounts. For example, a policy with $200,000 in dwelling coverage and $100,000 in liability coverage costs an average of $1,806 per year. Assuming the policy includes personal property protection at 50% of the total policy coverage amount, your belongings would be covered for $150,000. On the higher end of the spectrum, a policy with $600,000 in dwelling coverage and $$300,000 in liability coverage would cost an average of $3,323 per year. Assuming 50% for personal property coverage, your belongings would be protected for up to $350,000.

How to calculate how much personal property insurance you need

If you’re wondering, “how much homeowners insurance do I need,” the answer depends on a few factors. 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, Solomon said. For example, if your belongings are damaged in a fire, you will need a report from the fire department. Or 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,” he said.

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 said. After you have gathered your documentation, you will want to contact your insurance and file a claim. “From there, you will usually have a deductible to pay,” he added.

Best personal property insurance companies

Since insurance companies don’t sell separate property insurance policies (as this coverage is included in the standard homeowners insurance policy), your best bet is to work with one of the top-ranked home insurance companies of 2021:

State Farm: Ranked as the best home insurance company overall
American Family: Ranked best in customer satisfaction
Travelers: Ranked best for price
Farmers: Ranked best for discounts
USAA: Ranked best homeowners insurance for military

Is personal property insurance worth it?

If your home experiences a perilous event such as a fire or burglary, it’s likely that the structure won’t be the only thing damaged. Your personal belongings, including clothes, furniture, electronics and more, could also be damaged, and the cost of repairing or replacing them could be significant. That’s why personal property insurance is usually included as part of standard homeowners insurance policies and is well worth the cost.

Frequently asked questions

Does homeowners insurance cover personal property?

In addition to dwelling and liability coverage, most standard homeowners insurance policies also include personal property coverage. As long as your belongings are damaged or destroyed by a covered risk, such as a fire or theft, your insurance company will cover the cost of replacing them. However, you should check your policy for perils that aren’t covered, such as flooding or normal wear and tear, so you know what situations you may not be protected against.

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

It’s important to know that your landlord’s home insurance policy will not cover your belongings if they’re damaged or destroyed. For that kind of protection, you will need renters insurance, which often includes personal property coverage. As far as how much coverage you need, you’ll have to add up the value of your belongings (and potentially work with a professional appraiser) to determine the total value of these items. The good news is that renters insurance is fairly inexpensive: the national average cost for a policy with $40,000 in personal property coverage, a $1,000 deductible and $100,000 of liability protection is $326 annually, or about $27 a month.

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, as well as structural improvements you make to the building and living expenses if you’re displaced while repairs are made.

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.

Table of contents

What is personal property coverage?
Types of personal property coverage
What is covered under personal property insurance?
What are the coverage limits for personal property insurance?
Personal property insurance cost
How to calculate how much personal property insurance you need
How does a personal property coverage claim work?
Best personal property insurance companies
Is personal property insurance worth it?
Frequently asked questions

Guide to personal property insurance