Personal property insurance is often sold as part of a home insurance policy or a tenant insurance policy. It provides coverage for personal items, such as furniture and electronics. This guide explains how to get comprehensive personal property coverage and why it is so important.
What is personal property coverage?
Both landlords and renters will want to be able to answer the question “What is personal property coverage?” This is because most people cannot afford to replace all of their belongings if something goes wrong. Personal property coverage ensures that they won’t have to. An insurer pays compensation after a covered event damages or destroys property.
What does personal property insurance cover?
Personal property insurance covers property that can be bought, owned or moved. Personal property is distinct from real property. Real property is non-movable property. Examples of real estate include a house, land, or swimming pool.
Types of personal property covered
Personal property insurance typically covers things like:
- Outdoor equipment (such as lawn mowers)
Essentially, it covers items that people would traditionally keep in a home and take with them when moving.
Types of damage covered by personal property insurance
For personal property to be covered, generally everything that happened to the property must have been a covered loss. The following are common examples of damage covered by personal property insurance:
- Hail storm
- Water leak
- Burglary and theft
Some policyholders may also purchase additional protection, such as against floods, forest fires or earthquakes.
What coverage for personal property do I have?
When purchasing insurance, policyholders determine the amount of personal property coverage to obtain.
The cost of a policyholder’s home insurance or the cost of renters’ insurance is affected by the amount of coverage they purchase. Buying more coverage results in higher premiums. Purchasing less coverage – or waiving coverage – results in lower premiums.
Insureds can consult their insurance declaration page. It will indicate the level of protection of personal property available to them. Most often, the amount is represented as a percentage value of the structure of the house.
For example, a policyholder who has a home insured for $ 250,000 might have coverage ranging from 20% to 50% of that amount. This would mean that the policyholder has personal property insurance worth $ 50,000 to $ 125,000 of property.
What personal property coverage do I need?
When purchasing home insurance, it is crucial to answer the question “How much personal property insurance do I need?” Buying too little protection could result in big losses. An insured with insufficient coverage would have to pay personally to replace stolen or damaged items.
Unfortunately, determining the right amount of personal property insurance can be tricky. This is because it depends on the value of each insured’s property. The goal is to purchase enough coverage to replace most or all of your personal items if something happens to them.
How do I value my personal effects?
When purchasing personal property insurance, it is important to make an inventory list of all the property that should be covered by the policy. This means that the insured would go through their house or apartment. Move piece by piece, listing valuables and estimating how much each would cost to replace if destroyed.
This list of personal effects can be useful in determining the amount of personal property insurance required. It is also important when applying for insurance. It can be used to show the insurer what property has been lost.
Replacement cost of personal property versus actual cash surrender value
When purchasing personal property coverage, it is important to carefully consider the differences between replacement coverage and actual cash value coverage.
Replacement coverage pays for the cost of replacing destroyed property. For example, if a sofa is destroyed in a fire, insurance will pay for a new sofa.
Actual cash value coverage only pays for the fair market value of the destroyed or stolen possession. If a 10-year-old sofa is destroyed, insurance will pay the amount for which the old sofa would be sold on the open market.
Replacement coverage obviously offers a lot more protection. Many homeowners or renters who purchase personal property insurance would be better off choosing replacement coverage. This is true although it is generally more expensive than actual cash value coverage.
Insure jewelry and valuables
Many home insurance policies set limits on jewelry and other valuables. For example, a personal property insurance policy may limit jewelry coverage to $ 2,500. Coverage for guns, gold and silver, furs and antiques may also be limited.
For policyholders who want more extensive coverage for specific high value items, it may be necessary to purchase a rider, which is in addition to standard insurance. Or it may be necessary to purchase an entirely separate policy.
What is not covered by personal property insurance?
Only personal property that can be bought and owned is covered by personal property insurance. Vehicles, house structure and permanent structures such as a swimming pool or shed are not covered.
Most personal property insurance policies also have certain limits. For example, personal property coverage for jewelry can only pay up to $ 2,500, regardless of the actual value of the policyholder’s jewelry collection.
Personal Property Coverage for Landlords vs. Tenants
Homeowners can purchase personal property insurance as part of their home insurance coverage. A personal property home insurance policy adds protection for property to protection for a home.
For tenants, a landlord will likely have insurance covering the structure of the house, but a landlord’s policy will not cover any of the tenant’s property. Therefore, it is essential to purchase protection for personal property as a tenant. This can take the form of a tenant insurance policy.