How does personal property coverage — also known as home contents coverage — work?
Personal property insurance — also known as home contents insurance — is coverage that protects your personal belongings against damage and theft. While the details depend on your specific policy, this part of your homeowners insurance policy generally covers your personal belongings up to your coverage limits for damage or destruction due to a covered loss.
Let’s explore the ins and outs of personal property insurance to ensure the contents of your home are protected.
Your home contents insurance applies to everything you own that resides within the walls of your home or apartment — your clothes, TV and other electronics, furniture, appliances, and so on. What circumstances they are covered against depends on the specifics of your policy.
Most property policies do not cover personal property separately. It’s unlikely you will find an insurance policy to cover just your personal belongings. Your renters, homeowners, or condo policy may cover for your liability insurance and your personal property (contents). If you want insurance coverage for your personal property alone, invest in a renters policy (or home or condo).
Home appliances are considered personal property when it comes to insurance coverage designations. As long as your appliance was damaged or destroyed because of a covered peril listed on the policy, insurance will take care of its repair or replacement — the circumstances surrounding the damage sustained by your appliance matters to your insurance company, so it's best to be armed with proof of the peril that caused its state should your insurer inquire.
What appliances will be covered may vary from insurer to insurer, so confirm with the company providing your personal property insurance about which appliances are eligible for coverage. Things that plug-in to an outlet, like a refrigerator or washing machine, are examples of appliances that should be covered. However, appliances that are built-in to your home, like a hot water heater, could be covered by the dwelling portion of your homeowners insurance policy instead.
Wear-and-tear and maintenance and operational issues related to the age of an appliance are never covered by insurance.
Many other systems in your home — including HVAC systems and sump pumps — are not counted as personal possessions, nor are they covered under the dwelling portion of your homeowners coverage. Therefore, if you would like coverage for these oftentimes high-ticket items, you may need to see out equipment breakdown coverage. This add-on coverage is available from most insurers and typically offered a reasonable added premium.
You'll be glad to know that your personal property coverage follows you outside of your home. However, be aware that items kept outside of your residence are often subject to lower coverage limits than those kept at home. This means that such items — like those kept in a storage unit — are likely to be covered, though the limit may be capped at 10% of your dwelling value. Check your policy or contact an agent to see how your insurance company handles items away from home.
Plants, trees, and shrubs are covered under the home contents portion of your homeowners policy. Coverage for these items is typically capped at around $500 per item and does not cover natural deterioration or disease.
For particularly valuable items, such as jewelry and fine art, most companies will restrict the total amount of compensation allowed. This amount is often referred to as a sub-limit, which varies depending on the type of property that you have. Below are the common sub-limits you can expect for a variety of different property types.
Money, gold, coins
Jewelry, watches, furs
If you have any item that exceeds the limitations listed above, consider an endorsement to your personal property insurance. An endorsement exceeds the coverage limit in order to protect a specific kind of property. For example, a jewelry endorsement would raise your coverage limit for all your jewelry. If you have one piece of jewelry that is valuable, such as an engagement ring, you might want to consider a scheduled endorsement. This additional coverage would require an item-by-item appraisal, but is the best way to protect high-value items.
Your personal property coverage protects against the same perils as your homeowners coverage. As such, if you have more robust coverage, your belongings will be protected against more hazards. While you may need to consult your policy documents for more specific information, the following are general guidelines that can help give you an idea of what sort of perils you will be protected against.
If you have a named peril policy for your personal property, you will have coverage against the following perils:
If your property is damaged by any of the hazards listed above, you would have coverage up to your policy limits. It is called a named-peril policy because all the perils (causes of loss) are specifically listed on your policy.
Another type of coverage for personal property is known as an open peril policy. Here, all the perils that won’t be covered are specifically listed. This coverage is more robust: you only need to prove the excluded perils did not cause the damage.
In an open peril policy, the following hazards are excluded from coverage:
Certain perils will never be covered by insurance companies — regardless if it’s a named or open peril policy. If your contents are damaged or destroyed by the following perils, you will not have insurance coverage:
*You can add flood/hurricane coverage back to your contents by purchasing a flood insurance policy through FEMA and the National Flood Insurance Policy. This will cover your personal property contents up to $100,000. If the value of your contents exceeds this, consider purchasing another private flood insurance policy.
**You can add limited coverage for mold on many standard property insurance policies.
While it can vary from one homeowners policy to another, your property personal coverage is usually set to a percentage of dwelling coverage — usually between 50 and 70% of your dwelling amount. If your dwelling amount is $250,000, your personal property coverage may range from $125,000 to $187,500. Typical renters policies will default to $10,000 to $25,000 in personal property coverage. If you are sharing your renter’s policy with a roommate, you might elect to increase this coverage amount.
You generally have some flexibility for your personal property coverage limit. One way to determine how much coverage you need is to maintain a home inventory. This inventory of your possessions can help you keep track of your personal belongings and give you a more accurate picture of how much it will take to replace them. If you don't already have such an inventory, the task can seem daunting. Below are some ways to help start your home inventory.
Standard personal property insurance coverage will reimburse you for your belongings on an actual cash value basis. Actual cash value, or ACV, means you are reimbursed for what your belongings are currently worth — not what you originally paid for. Replacement cost, on the other hand, will reimburse you based on what it would cost to replace your belongings at the original market value.
If you’re able to, we recommend insuring your personal property contents on a replacement cost basis. While it does increase your premium, you are better compensated for your damaged items.
If you want your contents covered, we recommend you look for renters, homeowners, or a condo insurance policy. This will not only protect your belongings, but also includes liability, the structure of your home, additional living expenses, and other options alongside your contents coverage. For more information on these policies and the amount of coverage that you need, see below.
As you decide on your personal property coverage levels, we recommend keeping the following tips in mind: