What is included in Personal Property Insurance?

Apr 15, 2021 | Personal Insurance

Getting persona property insurance is not something that people always consider. Today, we look into why you should consider this coverage aside from insuring your home. 

What Is Property Insurance?

Imagine that you own a house but you need to leave it for a few months or even years and now, you have a free and clear and tidy nest egg. You have every right to enjoy your own house as long as you like as long as you continue paying your taxes. You may, of course, still live there or even rent it out and even leave it vacant or, of course, sell it too. You may ask yourself why do you still need property insurance?

Then, suddenly, a giant tree found in your backyard falls on your house and causes great damage to your property. Now, you have to spend thousands of dollars to repair your house. If you have property insurance, then every expense could be covered. It would have been paid in part or even whole for your home to be fixed or even replaced sparing you for spending a dime.

Personal properties are the things you own. For example, these are your furniture, electronics, and clothing. Insurance policies will usually include personal property insurance coverage whether you own a home or rent an apartment. This kind of coverage will help pay to repair or replace your personal stuff after a covered loss transpired such as theft or fire.

Property insurance is a broad term for insurance policies that give property protection coverage or liability coverage for property owners like you. This kind of insurance will provide you financial reimbursement and also its contents in case there is an event of damage or even theft and also even to a person who gets injured on site.

Property insurance can include several policies such as homeowners insurance, renters insurance, flood insurance, and even earthquake insurance. For personal property insurance, this is normally covered by a homeowners or renters policy. The very different thing about personal property is it’s very high value and costly. This will be usually covered by buying an additional to the policy called a “rider”. If there is a chance that there’s a claim, your property insurance policy will have to reimburse you for the actual value of the damage or even the replacement cost to fix the problem.

Buying insurance is to make you financially whole again when you experience a loss in your business. You have to pay a small fee to an insurance company so that there’s a guarantee from the company that they will bear the burden of a large however uncertain loss if there will be in the coming future. This is the same case with property insurance. Property insurance can protect you against any damage to or any loss of costly personal property such as your home or your car. Different kinds of property insurance include auto insurance, homeowners insurance, renter’s insurance, and flood insurance.

Key Points

  • Property insurance is a group of policies that offers you property protection or liability coverage.
  • Property insurance can include several insurance policies such as homeowners insurance, renters insurance, flood insurance, and earthquake insurance.
  • The three kinds of property insurance coverage include replacement cost, actual cash value, and extended replacement costs.
  • Purchasing property insurance is recommendable for anyone who owns an expensive property such as a house or even a car.
  • Property insurance is often purchased bundled with liability insurance.
  • Property insurance doesn’t really cover all of your property equally. These are for some things such as your jewelry since you may need additional floater coverage.

How much coverage do I have?

There are basically two kinds of personal property coverage. These are the replacement cost and actual cash value. Replacement cost insurance policy usually pays the dollar amount needed to purchase a new item when you place a claim. Meanwhile, for an actual cash value insurance policy, this works in depreciation to offer you a reimbursement based on the current value of an item. It’s also essential to point out that personal property coverage basically has limits on what it will pay to replace an item or a group of items.

Does Renter Insurance cover my insurance?

Something that is misunderstood by people regarding renter insurance is that their landlord’s insurance policy will also cover their personal belongings. Landlord insurance usually will help protect your residence against certain risks. However, this coverage usually does not cover a renter’s belongings. The personal property coverage included in a renters policy will help cover your belongings such as your cameras and laptops for example. This is up to the coverage limits in your policy.

Does Condo Insurance cover my belongings?

A usual condo policy will include insurance coverage too for the owner’s personal belongings against particular risks such as fire or theft for example. This protection does not really extend to the things inside a unit however even though a condo association’s insurance may also help protect the physical structure of the building and the areas shared by multiple owners. A condo owner’s insurance policy will help safeguard your personal belongings such as your furniture, computers, or clothing against a covered loss. We again repeat that coverage limits will also apply. We can help you understand more about this so please don’t hesitate to contact us.

Does homeowners insurance cover my personal property?

Most homeowners insurance policies will include coverage for personal property. This is in addition to also providing dwelling and liability protection up to the limits of the insurance policy. So, let’s say if your home is damaged by a covered peril such as a fire, for example, homeowners insurance will pay to repair the damage to the home structure and also will help replace your personal belongings. Kindly take note that the insurance coverage is, of course, subject to the terms and limits stated in your policy so please always read your policy or feel free to ask us if you have any clarifications or other inquiries.

Does insurance cover lost items?

Usually, homeowners, renters, and condo insurance policies do not provide coverage for your lost personal belongings. If one of your personal properties got stolen, you’ll have to find insurance that will help cover the loss. However, if you misplace a certain item or you happen to leave one of your belongings in a hotel room, for example, your insurance policy will not cover the loss. However, add-on protection such as a scheduled personal property can be purchased for particular items. This may then help you cover the lost items. We suggest talking to us to learn more about this.

Is jewelry covered by insurance?

Jewelry is usually considered a kind of personal property. However, it’s essential to consider whether your coverage limits are high enough to protect your valuable jewelry the most. In most times, insurance policies will have sub-limits for certain kinds of belongings such as your jewelry. Coverage for jewelry may be more limited while your overall personal property coverage limits are higher. Always make sure to check your insurance policy or kindly ask us questions about what kind of coverage you have in place for your jewelry.

What is scheduled personal property?

Always remember that the coverage for homeowners, renters, or condo policy usually comes with sub-limits for specific kinds of property, and sometimes, there are even limits for each item even though this may offer you protection for your personal belongings. We can help you decide whether you may take advantage more from scheduling certain items. This means that buying separate coverage to protect specific high-value items more such as your jewelry, art, or musical instruments.

What isn’t protected by personal property coverage?

Personal property coverage applies when your personal belongings get damaged by certain risks. It’s essential to note that not all kinds of risks are covered by a basic insurance policy. For example, if your personal belongings get damaged in a flood, your personal property coverage in homeowners, condo, or renters insurance policy would not offer you reimbursement. However, if you have a separate flood insurance policy, you would be able to file a claim for items that were damaged by a flood in your home. We greatly suggest that you ask us any questions regarding what kinds of risks your insurance may or may not cover.

It’s very essential to know what kind of coverage you have in the process if something really unexpected happens since the value of your personal belongings can really add up. We can help you review your insurance policy and we can also let you know what other kinds of coverage may be available to help you better protect what’s important to you.

What kinds of damage does personal property insurance cover?

Coverage limits may differ with each insurance policy. There are two kinds of homeowners/renters/condo insurance policies including open peril and named peril. They decide which kinds of damage you are covered for.

Policies with named perils

Standard homeowners insurance policies are called HO-3 policies and they cover your personal belongings against named perils. In order to file a claim, your personal belongings must be destroyed by something stated in the insurance policy. Kindly take a look at the following list:

  • Lightning or fire
  • Hail or windstorm
  • Damage caused by aircraft
  • Explosions
  • Riots or civil disturbances
  • Smoke damage
  • Damage caused by vehicles
  • Theft
  • Vandalism
  • Falling objects
  • Volcanic eruption
  • Damages caused by the weight of snow, ice, or sleet
  • Water damage from plumbing, heating, or air conditioning overflow
  • Water heater cracking, tearing, and burning
  • Damage from electrical current
  • Pipe freezing

So, for example, if your couch is destroyed from a ruined pipe in your ceiling or your fridge gets burned, you will be eventually covered since these occurrences are accepted as perils. On the other hand, if your living room got run over by a wild animal when you accidentally left your door open, your property would not be covered since you are not really covered for “wild animal damage”.

In such cases, you will have to opt for an “open peril” policy.

Open peril policy

Open peril insurance policies safeguard your personal belongings from any kind of damage as long as they’re not excluded from your insurance policy. Basic homeowners/condo policies usually exclude the coverage for the following:

  • Natural settling, cracking, shrinking, or expansion of the foundation
  • Earthquakes and floods
  • Pressure from tree roots
  • Faulty construction
  • Insects, vermin, rodents, and pet damage
  • Natural wear and tear
  • Mold
  • Corrosion

For instance, if your clothing or furniture is damaged in an earthquake, you would not be eventually covered. However, in our previous example of a wild animal entering your home, you’re not explicitly excluded from that. You would be covered since your insurance company can’t prove that your policy excludes the cause of the damage.

Actual cash value vs. replacement cost value

Basic homeowners policies will pay you for the actual cash expense of your belongings if they’re destroyed in a covered incident. However, you will receive payment for the object up to its current value minus depreciation. You can get a replacement-cost value or RCV policy if you want to be fully insured which then pays for the current market price for an item you file a claim for. This kind of policy is more expensive.

Let’s say for example, you bought a TV 10 years ago and may have cost at least $1,000 then. However, it has already depreciated and may only be valued at $200 now. You would only get $200 after filing a claim with the actual cost value insurance. However, if you file a claim with the replacement cost value insurance, you would get the full $1,000 to replace your TV.

Does Homeowners Insurance Cover Damaged or Lost Jewelry?

You may own an expensive worth of jewelry however basic standard insurance policies can only cover up to a certain amount such as $5,000. Other examples of high-value items are musical instruments, electronics like expensive laptops and phones, and also cash.

In order to get the full value of those objects insured, you usually have to buy an endorsement from your insurance company to increase the limits on these items. There are also other insurance policies you can also apply for these items as well.

How Property Insurance Works

Some of the perils covered by property insurance usually include weather-related incidents including damage caused by fire, smoke, wind, hail, the dangers of snow and ice, lightning, and others. Property insurance can also protect you against vandalism and theft which can cover your property structure and its contents. Property insurance can also provide you liability coverage in the event that someone other than you, the property owner or the renter, is injured while on your property and decides to sue you.

Property insurance policies also exclude a number of things too such as damage from tsunamis, floods, drain and sewer backups, seeping groundwater, standing water, and other sources of water. Mold is not also covered and also damages caused by an earthquake. Most insurance policies will not cover extreme circumstances such as nuclear events and even acts of war or terrorism.

You can either file the claim online or over the phone if your personal belongings get damaged and you think that your insurance company will eventually cover them. Someone called a claims adjuster will come to you to assess the damage of your personal property, determine the validity of the claim, and will report back to the insurer.

Once your claim is approved, you will receive the reimbursement in two stages. In the first stage, the insurance company will decide an acceptable amount to repair and/or replace the object. If you have actual cash value, you will receive this amount minus the expense of depreciation. For replacement cost value, you will receive enough money to replace that item according to its current value. The insurance company may reimburse you for the extra expense if you have to spend more than expected to repair the item.

Always remember to save all your receipts and statements. You will be given two years from the time of the first payment to replace or repair the object.

Understanding Property Insurance

There are three kinds of property insurance coverage— actual cash value, replacement cost, and extended replacement costs.

  • The replacement cost covers the expenses of repairing or replacing property at the same or equal value. The coverage for this is based on replacement expense values rather than the actual cash value of items.
  • Meanwhile, the coverage for actual cash value covers the owner or the renter for the replacement expenses minus the depreciation. For example, if the destroyed item is 10 years old, you will get the value of a 10-year-old item not the value of a new one.
  • For extended replacement costs, this will pay more than the coverage limit if the expenses for the construction have increased. However, this would normally not exceed 25% of the limit. When you choose to buy insurance, the limit is the maximum amount of the benefit the insurance company will pay you for a given situation.

Special Considerations

Most homeowners opt for a combination of insurance policies that will compensate for the physical loss or damage caused by numerous perils. This includes fire, vandalism, and theft. The coverage called as HO3 policy has a number of conditions and exclusions. There is already a stated limit on the coverage of certain valuables and collectibles such as gold, wedding rings, and other jewelry, furs, cash, firearms, and other valuable items. No insurance coverage is usually given in an HO3 for accidental breakage/damage and mysterious disappearances such as lost or misplaced items including fine art and antiques.

HO5 homeowners coverage includes everything included in an HO3 policy. However, this is leaning towards the structure itself and the property within the home including your furniture, appliances, clothing, and other personal items. An HO5 doesn’t really cover for earthquakes or even floods. You can get HO5 insurance policies for homes that were either built in the last 30 years or renovated in the last 40 years and they usually cover any damages at replacement expenses.

HO4 property insurance is typically known as renter’s insurance. This covers the tenants from loss of personal property and liability coverage. This does not cover the actual house or apartment that is being rented which should be usually covered by your landlord’s insurance policy.

Kindly note that none of these coverage levels reimburses the homeowner for any property that gets damaged in more usual wear and tear situations like a roof that starts to leak without damage from wind and hail. This is where home warranties come in which is another way to safeguard your property and this can be helpful for you.

The Importance of Property Insurance

Who Needs Property Insurance?

We suggest people who own expensive property should purchase property insurance. You are forced in many, different cases either by law or a mortgage contract to purchase and also carry property insurance. For example, all of the states in the country require drivers to also carry auto insurance normally in the form of liability insurance.

Liability insurance covers the repair and financial replacement to someone else aside from the individual involved in an accident. For example, the liability insurance of the person involved pays for the car repairs and medical bills for the other driver and any other passengers. When you opt for required liability coverage, you will also be given the opportunity to opt for property insurance in the form of comprehensive insurance and also collision insurance with regards to auto insurance. You could ultimately be saved from financial issues if your own car is damaged in the accident.

Coverage

Many homeowners have a variety of misguided views of what their homeowner’s insurance actually covers according to a survey published in the Journal of Financial Planning. Roughly 33% of homeowners in the survey thought that flood damage would be covered by their policy, while around 51% of the respondents thought that their home’s main water line break damage would be covered, and finally, 34% of them thought mold damage was covered by their insurer. These data are from the National Association of Insurance Commissioners.

In reality, the perils, which are causes of property destruction, that are usually not covered are:
  • Flood damage (this is a separate policy)
  • Earthquake (this is also a separate policy)
  • Mold Maintenance damage (examples are worn-out plumbing, electrical wiring, air conditioners, heating units, roofing, mold, and pest infestation)
  • Sewer backup

Policies are usually written so that it must be sudden and accidental for something to be covered. This means that it wasn’t just a slow leak that caused the damage for many months. This is usually not covered by insurance. It will not be covered if your roof gets destroyed due to old age, not from storm damage.

The perils that are normally covered are:
  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Smoke
  • Theft
  • Vandalism or malicious mischief
  • Riot or civil commotion
  • Damage caused by aircraft or vehicles
  • Volcanic eruption

Liability Coverage

Many insurance policies also hold an important provision for liability coverage in addition to covering the value of your home or other property. Some of you may think this is not very essential. However, there are possibilities that you could still get sued by different lawyers searching for victims like you. Liability coverage is well known to people who own automobiles but this may be lesser known to homeowners.

You will pay for the damage caused by the fire if your neighbor’s house catches fire since you left your grill unattended. You have already paid the insurance company your premiums so that they will pay for huge claims when the time comes. This same thing also goes for someone who gets hurt and requires medical attention while staying on your property.

You may also be entitled to a reimbursement if you are on vacation and your property is stolen such as a diamond ring. Just always be sure to document how the theft happened with evidence that you owned the said personal property. You should be able to give a police report to your insurance company.

You should also know what your policy does and does not cover. This is essential so please remember this. Insurance companies don’t just stay in business by asking for a minimal amount to cover any and all the things that can happen to your property.

Additional (Non) Coverage

Home-based businesses are usually not covered. This doesn’t come with the home study but a place where people get together into your home as customers like a workshop where you repair furniture. You will need a separate business commercial policy to insure this particular area and its connected liability. These rules differ from every state and every country. Also, if your property, especially your home is vacant for a long time usually at around 30 days, then the homeowners’ policy may be canceled as soon as possible by your insurance company. It will be assumed that a vacant home is much more risked with more number of perils such as fire and theft hence changes the risk profile enough to require another separate insurance policy. You may get another insurance policy to cover this home as well if you have a second home or vacation property.

Important to take note: Kindly be aware of how your policy covers repairs. Always covering the full replacement expenses is much better than just the actual cash value (ACV). However, this will cost you more in premiums.

Pitfalls to Avoid

We suggest that you always check if your policy covers repairs at actual cash value or at replacement expenses. The latter is usually much better. One sample is if your roof was damaged and needs to be completely changed, the replacement expenses will pay for the replacement and this is less your deductible. This is while your actual cash value will pay you what your roof was estimated to be actually worth at the time of the damage. The tradeoff is that your actual cash value is less than replacement cost coverage.

Art and Jewelry

In addition, if you have expensive jewelry or art that you want to be covered, you may have to obtain a floater. This is an add-on to your main insurance policy. Many insurance policies have basic amounts that they will pay out for losses to specific items and they will pay no more.

Coinsurance Clauses

It is important to also note that some property owners only want to insure a property for what they actually paid for which may lead to a coinsurance clause. This will depend on local laws of your state where the property is currently insured for less than about, for example, 80% of its current replacement expenses. You will have a lesser amount of coverage and your insurance company will require you to share in a percentage of the repairs above and more than the deductible amount.

Premium Factors

Does your area always experience tornadoes, hurricanes, or floods? Do you also own a large dog or a swimming pool? Do you also happen to smoke? How’s also your credit score?

If your answer to any of these questions is “yes”, then you must be a higher than normal risk and an insurance company will charge you accordingly. These are some of the factors that it will take into account when setting your insurance premium rates. The higher your rates will be the more that these and other risks are applicable to you.

A Word of Warning

Just a little word of warning. Some insurance companies out there provide seemingly unbelievable rates for their insurance policies. It should be already a red flag if the insurance company you’re talking to is unknown and their rates are so good. We greatly suggest checking around for the company’s reputation and don’t just take the salesman’s word for what they say. Carefully study the insurance policy they offer and see what they cover and what they do not cover.

Just be careful since you may find only too late what you thought was enough coverage was barely the legal minimum in your location. We suggest getting on with high-quality coverage when you are looking for benefits of property insurance. Always remember cheap insurance can be very expensive too.

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