Understanding Personal Property Coverage in Homeowners Insurance: What It Covers and How It Works
What is Personal Property Coverage?
When it comes to homeowners insurance, many people are aware that it covers the structure of their home. However, it also contains a component for personal belongings known as personal property coverage.
What Does Personal Property Coverage Insure?
Personal property coverage insures the contents of your home, including furniture, appliances, electronics, clothing, and more. Certain high-value items, such as jewelry and artwork, may have limited coverage and require an endorsement.
Business vs Personal use
In homeowners insurance, personal property insurance is intended for items used for personal purposes only. If you run a business in your home, you may need separate business personal property insurance.
Understanding Coverage Limits and Valuation
The amount of personal property coverage is generally a percentage of the overall dwelling limit. However, your policy may have specific limits. It's important to understand how the value of your items is calculated, whether actual cash value or full replacement cost.
After meeting your deductible, the insurance company will help pay for losses covered under your policy. Homeowners insurance companies offer personal property insurance in different levels of coverage. When purchasing a policy, you can choose your level of coverage based on the total value of your items.
Personal Property Coverage and Limitations
Your personal property policy covers all of your belongings, wherever you keep them, with some limitations. This includes the interior of your house, yard, shed, car, garage, and even in hotels when you travel. However, your items are protected only from covered losses.
Choosing a Homeowners Insurance Policy
When selecting a homeowners insurance policy, consider whether you want an open peril policy or a named peril policy. An open peril policy covers your personal belongings from any type of accidental damages not explicitly excluded. A named peril policy is less expensive but covers only certain losses specified in your insurance policy.
Reimbursement Options: Actual Cash Value vs. Replacement Cost Value
Another factor to consider is how your insurance policy calculates reimbursement. An actual cash value (ACV) policy factors in depreciation when determining the value of your items. A replacement cost value (RCV) policy does not factor in depreciation and pays to replace damaged or destroyed items based on their current market value up to your policy limit.
Making the Best Choice for Your Family
Understanding how personal property coverage works and what it covers is crucial for homeowners looking to insure their belongings. By considering the type of policy, level of coverage, and reimbursement calculations, you can make informed decisions that fit your needs and budget.