Personal property coverage, also known as Coverage C or home contents insurance, is the section of a home insurance policy that covers your possessions against listed perils in your policy. What your home contents insurance covers depends mostly on the type of item involved and how it was damaged. This article covers:
- The definition of personal property insurance
- What personal property covers
- What home contents insurance doesn’t cover
- How much personal property insurance do I need?
What is personal property insurance?
Personal property insurance covers your belongings inside and outside your home from damage, destruction or theft from causes listed in your home insurance policy. Belongings are covered up to your coverage limits. This is different from dwelling coverage, which covers the physical structure of your home. That means that if items like your furniture, clothes, electronics and other possessions are damaged by a covered threat, you'll be compensated for their repair or replacement ‒ up to your policy’s limits.
What does personal property insurance cover?
Personal property insurance covers a variety of your belongings both inside and outside of your house. You'll want to read your home insurance policy for details, but most home insurance policies usually cover:
- Television and stereo systems
- Kitchen appliances
- Yard tools
Expensive items such as jewelry and art are usually covered to a certain limit. That limit is usually not enough to provide full coverage ‒ standard home insurance policies cover a max of $2,000 in jewelry, for example. To insure your valuables for their full value you'll want to look into an endorsement, detailed below.
What threats your personal property insurance protects you against depends mostly on the type of policy you have. Specifically, whether your policy has named peril coverage or open peril coverage.
Named peril coverage
Named perils are threats explicitly listed in your home insurance policy. With named peril coverage, if it isn't written in your policy, it isn't covered.HO-3 policies, the most common type of home insurance, provide named peril coverage for personal property. The most common damage sources included in a named peril policy are:
- Wind and hail
- Fire and lightning
- Damage due to snow, ice and sleet
- Volcanic eruption
- Falling objects
- Water damage from plumbing or HVAC
- Frozen or burst pipes
- Electrical damage
- Civil disturbance or riot
- Vehicular or aircraft damage
- Vandalism or theft
Open peril coverage
Open peril home insurance covers any source of damage in your home unless it is excluded in writing in your policy. This is obviously a much more comprehensive coverage policy than named peril provides. However, open peril coverage policies are often much more expensive as well.
Personal contents coverage exclusions
Personal contents coverage usually carries the same exclusions as your standard homeowners policy. The most common home contents coverage exclusions are:
- Sewer backup
- Foundation seepage
- Intentional loss
You can often buy coverage add ons or separate insurance policies to cover some of these perils. As an example, flood insurance, earthquake insurance, and sewer backup insurance are all available as a separate policy.
Some personal property is usually excluded from home insurance simply because it's most often covered under another form of insurance. Items of this nature include:
- Audio equipment inside vehicles
- Aircrafts and boats
- Belongings rented to others currently off of your home’s premises
How much home contents insurance should I have?
The easiest way to judge how much personal contents coverage you need is to make an inventory list. List all of your belongings in the house along with their dollar values, serial numbers, and make and model details. This can take awhile to put together, but it’s worth it should you have to file a personal property claim. You will want enough coverage to replace all your possessions in the event of a total loss.
Dollar limits for personal property insurance coverage may vary depending on the policy. Most policies set personal property coverage limits at 20% to 50% of the structure/dwelling coverage limit. So, if your insurance policy has $250,000 in dwelling coverage, your personal property limit will be between $50,000 (20%) to $125,000 (50%).
Exact coverage limits are found in Section C of your home insurance policy. Certain valuables, like art and antiques, might have a lower limit amount on what your home insurance will pay out. For example, you may have $200,000 total personal property coverage, but the payout limit for a single statue may be $4,000. Other items that can fall in this category are:
- Jewelry and furs
- Water craft
- Rare coins
- Musical instruments
To optimize your coverage of these personal items, consider getting a scheduled endorsement. Scheduled endorsements help you insure your valuables for their full value instead of the limit set by your standard home insurance policy. Before buying an endorsement, you’ll want to get your valuables appraised. Your home insurer will help you figure out how much scheduled coverage you need based on the appraisal.
Scheduled endorsement coverage can be pricey, but it’s worth it for all perils protection alone. This means your scheduled items are covered for anything except for incidents excluded in writing. Also, many insurance companies don’t attach a deductible to scheduled contents coverage.
Personal property insurance and replacement cost vs. ACV
When you file a personal property claim, how much you'll be paid out depends on whether your policy has replacement cost or actual cash value (ACV) payout. Replacement cost is based on what you would have to pay if you bought the item today. Actual cash value takes into account the depreciation of the item's value due to age.
To show the difference between replacement cost and ACV; if you bought a $1,200 computer a year ago, an ACV payout today would only get you a fraction of the original cost after depreciation. With replacement cost, your claim would be paid out based on how much a computer of equal capability costs. Replacement cost is obviously the better choice, but it also tends to be more expensive.
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