What is Personal Property Insurance?

Could you afford to replace all of your possessions—or even your most expensive possessions—if something happened to them? For most people, the answer to this question is no. That’s why buying personal property insurance coverage is so important in 2018 and beyond.

The things you own are potentially at risk of being damaged, stolen, or destroyed for all sorts of reasons. Your personal belongings could be taken from your car or from your person. Your house or apartment could be robbed. Or a fire, flood, or another disaster could lead to much of what you own being destroyed or damaged beyond repair.

Personal property insurance coverage protects you in case of a disaster so you don’t face devastating financial loss. You can get insurance for essentially everything that you own that has objective value and especially if it could be considered high-value. Coverage is likely more affordable than you think.

To make sure your possessions are protected you need to know how to secure personal property coverage—and how to make sure your coverage is sufficient to replace your possessions. Read on to learn how to choose an insurance company and get the personal property coverage that you need.

On this page:

• What is Personal Property Insurance Coverage?
• What Does Personal Property Insurance Protect Against?
• Purchasing a Personal Property Insurance Policy

What is Personal Property Insurance Coverage?

Personal property insurance coverage is insurance that covers the things that you own. Typically, personal property insurance covers things such as your furniture, your electronics, and other belongings in your home or apartment.

While most policies provide broad coverage for the things that you own, policies also have limits. For example, your insurance may cover jewelry—but only up to a certain dollar limit. If you have a very expensive engagement ring or family heirloom jewelry, or even certain musical instruments, you’ll need an add-on or rider to a standard policy to secure coverage.

Likewise, if you have an expensive fine art collection, lots of first edition books, or certain types of precious metals such as a bunch of gold and silver coins in your home, a standard personal property insurance policy won’t provide full coverage for these especially valuable items.

Coverage, in other words, is typically available for the types of property most people own, and you can add special riders or additional coverage when you have particularly high-value possessions that would be especially costly to replace.

Personal Property Insurance is Often Part of Your Renter’s Insurance or Homeowner’s Insurance

Most people do not buy a separate personal property insurance policy. Instead, they buy coverage for their possessions when they buy homeowner’s insurance or renter’s insurance.

Protection for personal property is one of two primary types of coverage that is included in a homeowners insurance policy or a rental insurance policy. The other is liability protection, which provides coverage in case someone sues you.

You need to buy your own renter’s insurance—with personal property protection—even if you live in a property with a landlord that is insured. That’s because the landlord’s policy will cover the structure of the home, such as paying to rebuild the building but will not provide coverage for your possessions in the apartment if something should happen.

Personal Property Insurance Doesn’t Just Cover Problems in Your Home

Although personal property insurance is sold as part of renter’s or homeowner’s insurance coverage, that does not mean that coverage is available only if something happens to your possessions inside of your home.

You’ll also be covered if something happens to your personal property anywhere that you are. If you are on vacation and your engagement ring is stolen in a mugging or if your laptop is stolen out of your vehicle, your insurance should cover you for the losses, so you’ll be able to recoup the money for personal property replacement.

What Does Personal Property Insurance Protect Against?

The protections available to you when you buy a personal property insurance policy or contents insurance policy will vary depending upon the kind of policy and optional coverage you bought. Policies are broadly divided into two different types:

• Open peril policies cover a broad range of problems that could arise and could lead to loss of your possessions or damage to your personal property.
• Named peril policies provide coverage for specific things identified in the policy. If your property is lost or damaged because of a disaster not specifically mentioned in the policy, you would not get coverage.

Typically, your personal property insurance policy will protect you when there’s weather damage, damage due to theft, smoke damage, damage from vandalism, electrical damage, and some kinds of water-related damage. However, policies typically have exclusions. For example, your standard homeowner’s or renter’s policy will often exclude damage caused by a flood so you would need separate flood insurance. Ensure that you carefully read your insurance information and understand your coverage amount to make sure you have all the protection you need.

It’s important to understand exactly what your policy includes and excludes. If your policy says it covers water damage, you may think you’re covered in case of a flood—but your water damage protections may only extend to situations where a pipe leaks and not provide any coverage in the event that your town floods and your home ends up partially underwater.

To understand inclusions and exclusions, read the policy language very carefully. If you have any doubts about whether a certain kind of property is covered or whether a particular peril is covered, talk with your insurance agent or with the insurance company before you get covered.

Purchasing a Personal Property Insurance Policy

When you shop for a personal property insurance policy, you’ll need to determine:

• How much coverage you need
• Whether you want a market value policy or a replacement value policy
• How high your deductible should be

How Much Coverage Do You Need?

Determining the amount of coverage you need can be complicated since it is hard to know how much it would cost to fix or replace all of your personal possessions in the event of a disaster.

To simplify the process of getting covered, many insurers offer coverage based on a certain percentage of the dollar amount value of your property. If your home itself is insured for $200,000, for example, you may get a policy that equals 20% of the home’s value so you’d get $40,000 in coverage for your possessions.

When a percentage-based formula is used, insurers typically provide coverage for between 20% and 50% of the coverage limit on your home. However, if you have lots of especially valuable possessions, you may need to talk with your insurer about getting a higher amount of protection.

And, as mentioned above, you may need to add riders or additional coverage for specific possessions that have a very high cost, such as getting a special add-on policy for your expensive jewelry.

Do You Want a Market Value Policy or a Replacement Value Policy?

To decide between a market value policy or a replacement cost coverage policy, you need to understand the kind of coverage and covered loss that each of these policies offers.

If you get a market value policy and your possessions are damaged, lost, or destroyed, your insurance would pay out based on the market value of your possessions. For example, if your couch was five years old, it might have a market value of only $300 because that’s what it costs to buy a five-year-old used couch.

Unfortunately, the market value of your possessions is often much lower than what it would actually cost you to replace your possessions. After all, you probably can’t find a five-year-old couch just like yours to put back in your home after your couch was destroyed by fire or vandalism during a break-in.

Replacement value coverage ensures you have the money that you need to replace the possessions that are lost or damaged due to a covered peril. A replacement value policy is typically more expensive than a market value policy, but you may be better off getting replacement value coverage so you won’t find yourself with too little money to actually replace your possessions if something happens.

Whatever kind of policy you have, you need to be sure you can prove what possessions you lost and what they were worth in the event you need to make a claim. You may want to save receipts and do a periodic home inventory with documentation, so you have proof of what items you own in case something happens to your property.

What Deductible Should You Have?

Finally, you need to think carefully about your deductible. The deductible is the amount you have to pay before the insurer pays.

A policy with a higher deductible will be cheaper, but you’d have to pay more if a tragedy happened. If you had a fire that destroyed $10,000 worth of your possessions and you had a $2,500 deductible, you’d only receive a payout from the insurer of $7,500 and would need to pay the remaining $2,500 out-of-pocket. It can be hard to come up with this money after a tragedy.

A lower deductible policy means paying higher premiums for more coverage. But, you won’t have to worry about paying for repair or replacement of your possessions when disaster strikes.

Bottom Line

If you do not have personal property coverage, you’re taking a serious risk unless you can afford to replace everything you own. Policies are affordable and can be easily purchased as part of your homeowner’s insurance or renter’s insurance and sometimes as part of condo insurance. Shop around for coverage in your zip code so you can find a policy from a trusted insurance company that provides the comprehensive protection you need.