How does personal property insurance work and what does it cover?

Personal property insurance pays to repair or replace your belongings after a covered loss, and it comes built into your homeowners, renters or condo policy rather than sold on its own. It covers the furniture, clothes, electronics, appliances and tools you would take with you if you moved.

Your limit is set as a percentage of the coverage on your house, which means it reflects the size of your home rather than the value of what’s inside it. A household that has been in the same place for 20 years can own far more than that formula assumes.

Ask your agent how much personal property coverage you carry and whether it pays replacement cost or the depreciated value of used belongings. Raising the limit or switching to replacement cost is usually a small premium change, and it only helps if you make it before the loss.

What does personal property insurance actually pay for?

Personal property coverage pays for your belongings rather than the house itself. If a fire destroyed your home, one part of your policy rebuilds the structure and this part replaces the furniture, clothes and electronics that were inside it.

It also travels with you, so a laptop stolen from a hotel room or a suitcase taken from a rental car is claimed on your home policy.

The loss has to come from a cause your policy names. The standard homeowners form lists fire, lightning, windstorm, hail, theft, vandalism, explosion, falling objects, the weight of ice and snow, and water from a burst pipe, among others.

Your deductible is the amount you pay yourself before the insurance company pays anything. If a burglar takes $1,400 worth of your things and your deductible is $1,000, you cover the first $1,000 and your insurer sends you $400.

Covered belongings include:

• Furniture
• Clothing
• Appliances that aren’t built in, including the fridge, dishwasher, washer and dryer
• Electronics, including televisions, computers and stereo equipment
• Rugs, curtains and other décor
• Dishes, cookware and small kitchen equipment
• Tools and sporting goods
• Jewelry, artwork, silver, firearms and collectibles, though these are capped well below your total limit

How much coverage do you have for your belongings?

Your policy sets it as a percentage of the coverage on your house, and the California Department of Insurance puts the common figure at 50%. At that level, a home insured for $300,000 carries about $150,000 for everything inside it. Some carriers write it higher.

Your exact figure is in your insurer’s app or online account, and your agent can read it to you in a minute.

That percentage comes from the size of your house rather than from what you own, so it can leave you underinsured. A couple in a small house with 20 years of furniture, tools and a home office can own $200,000 of belongings against a $150,000 limit, and the extra $50,000 comes out of their pocket after a fire.

How do you know if you have enough personal property coverage?

• A home inventory tells you what your belongings are actually worth. Film each room with the closets and cabinets open, then look up what your furniture, appliances and electronics cost to buy new today and add it up.
• Compare that total to your policy limit and ask your agent to raise it if you’re short. A household with $200,000 of belongings and a $150,000 limit needs another $50,000 of coverage, which adds a few dollars a month to the premium.
• Recheck the number after anything expensive comes into the house. A $6,000 engagement ring, a $4,000 home office setup or a set of inherited furniture raises what your belongings are worth while your coverage stays where it was, and anything above your limit is uninsured until you raise it.
• Ask whether your policy pays today’s prices or a depreciated value. A $150,000 limit is a ceiling rather than a guaranteed payout, and a policy that pays depreciated value settles a decade of accumulated furniture and clothing for a fraction of what buying it again costs.

Will your insurance pay enough to replace what you lost?

Your policy pays either what your belongings cost new today or what they were worth used, and after a fire that difference runs into tens of thousands of dollars. A decade of accumulated furniture, clothing, kitchen equipment and electronics depreciates heavily on paper, even though replacing all of it happens at current retail prices.

Across a household’s furniture, clothing and electronics after a fire, the gap between the two settlements runs into tens of thousands of dollars.

Ask your agent which one you have and what replacement cost would cost to add. Some carriers also sell extended replacement cost, which pays above your limit when prices spike after a widespread disaster, and it’s worth pricing at the same time.

Why does insurance pay so little for stolen jewelry?

Jewelry has its own cap inside your personal property coverage, so an $8,000 engagement ring stolen in a burglary pays out at that cap no matter how much total coverage you carry. Silverware, firearms and cash carry their own caps too.

Most of these caps apply only to theft. The same jewelry, silverware and firearms destroyed in a fire are covered up to your full personal property limit.

Carriers and state forms set their own figures, so ask your agent which limits your policy uses before assuming the numbers below, from the standard homeowners form, apply to you.

How do you fully insure an engagement ring or an art collection?

Scheduling an item lists it on your policy at an agreed value, which takes it out of the category cap and pays that amount if it’s lost. You give your insurer an appraisal or a receipt, and the item goes on the policy by name.

• Get an appraisal on anything worth more than its category cap. A current valuation is what sets the payout, and a 2015 appraisal pays 2015 prices.
• Ask whether the deductible applies. Scheduled items often carry none, so a lost earring is reimbursed in full.
• Check what causes of loss it adds. Scheduling usually covers accidental loss, including a ring that goes down a drain, which a standard policy excludes.
• Update the values every few years. Gold, art and instruments move in price, and a schedule set at an old figure pays the old figure.

What won’t your policy pay for?

Your policy won’t pay for flood or earthquake damage, whether you carry homeowners, renters or condo insurance. Belongings ruined by rising water or a quake are covered only if you carry a separate flood or earthquake policy.

Everything else that’s excluded either fails slowly or was never covered property to begin with.

• Wear and tear. A couch that sags after 12 years and carpet worn thin in the hallway are maintenance, not a claim.
• Mechanical breakdown. A washing machine that quits at age 10 is on you, though a home warranty or an equipment breakdown endorsement can cover it.
• Damage from pets and pests. A rug your dog chewed and floor joists eaten by termites are both excluded.
• Your car and anything installed in it. Auto insurance covers the vehicle and its stereo, while a laptop stolen out of the back seat is a personal property claim on your home policy.
• Business property kept at home. The standard form caps it at $2,500, so a home office with $10,000 of camera or computer equipment needs a business endorsement or its own policy.
• Pets, aircraft and property held as business inventory. These are excluded outright, no matter what happens to them.

Are your belongings covered when they’re not at home?

Belongings that travel with you stay covered anywhere in the world, so a stolen suitcase or a laptop taken from your office is claimed on your home policy, subject to your deductible.

Property that lives at another address is capped. The standard form limits belongings usually kept at a residence other than your main home to 10% of your personal property coverage or $1,000, whichever is greater, which reaches a vacation house, a storage unit and furniture at a second property.

A dependent student’s belongings at school are usually covered under your main limit instead. Confirm that with your carrier before move-in, since age and enrollment status affect it.

How does personal property insurance work if you rent or own a condo?

Renters and condo policies cover your belongings the same way a homeowners policy does, with the same theft caps and the same choice between paying replacement cost and paying depreciated value.

• Renters pick their own limit. There’s no dwelling coverage to take a percentage from, so the number is yours to name, and an inventory is how you land on one that would actually replace what you own.
• Condo owners cover what the association doesn’t. Master policies vary, and some stop at the bare walls while others include fixtures, cabinets and flooring. Ask your association which type it carries, since anything it excludes falls to your policy.
• Caps don’t shrink with a smaller policy. A stolen ring hits the same jewelry cap whether you carry $30,000 or $200,000 of coverage, so scheduling it matters as much for a renter as for a homeowner.
• Renters policies often pay depreciated value by default. Switching to replacement cost is the difference between a check that covers a fraction of your furniture, clothes and electronics after a fire and one that pays what replacing them costs.

How do you file a claim for stolen or damaged belongings?

Add up what the loss is worth before you call, because a personal property claim only pays the amount above your deductible. A $1,400 burglary against a $1,000 deductible puts $400 in your pocket and a claim on your record, which can raise your premium at renewal for years.

• File a police report the same day on any theft. Insurers require the report number on stolen property claims, and a delay of a few days is a reason for a carrier to question the loss.
• Submit a room-by-room list with descriptions, ages and what each item costs to replace today. Your payout is built from this list, so the drawers, closets and garage you forget are money you don’t get back.
• Flag anything that falls in a capped category. Jewelry, silver, firearms and cash have their own limits, and a scheduled piece is claimed against its scheduled value instead.
• Photograph damaged belongings before you throw anything out. An adjuster can’t inspect what’s already at the curb, and undocumented items get settled at the carrier’s estimate rather than yours.
• Replace the items and send in the receipts if you have replacement cost coverage. The first check pays depreciated value, and the balance comes only after you buy the replacements, so leaving the second step undone can cost you thousands.
• Ask your adjuster how long you have to claim that balance. Policies set a deadline for replacing items and collecting the difference, and it varies by carrier and state.

Are you underinsured? A 3-step formula to value your possessions

Make sure you have the right personal property protection by following these three steps:

• Conduct a home inventory: Make a list – supported by photos and videos – of everything you own. Group like items together and assign a value for everything. For high-value items, such as electronics, record serial numbers, receipts and related documentation.
• Choose a valuation method: Decide if you want to insure for actual cash value or replacement cost value. ACV will lower your premiums, but it won’t fully cover the cost to replace your items. It’s best to go this route only if you have enough in savings to cover the difference.
• Identify items that need additional coverage: High-value jewelry, artwork, furniture and electronics may need a separate floater policy or an endorsement to be fully covered. Most standard policies will cover individual items up to $2,500, but some insurers use a lower $1,500 limit.  

Related Articles