What Is Personal Property Homeowners Insurance?

Coverage C, also called personal property, personal belongings or contents insurance, is one of the six major types of homeowners insurance policies. This type of policy will insure you against damage, destruction or theft of your personal property such as:

• Computers
• Hi-fi equipment
• Furniture
• Electronic devices
• Clothes
• Kitchen appliances
• Washing machines
• Free standing lighting
• Bathroom accessories
• Bedroom accessories

If you have valuable items that you keep in your house, or many items which you would not be able to afford to buy again immediately, then this type of insurance is definitely something that is worth having as it can save you a lot of money and also help you to quickly recover from any losses.

Personal property insurance tends to be especially useful for families, as it can help to cover accidental damage caused to expensive items by young children or teenagers.

In this article, we will go over the important points related to personal property insurance and how to get the most protection out of it.

If you are interested in the other major types of home insurance policies, then please see the articles below:

Coverage A (Dwelling) Homeowners Insurance
Coverage B (Other Structures) Homeowners Insurance
Coverage D (Additional Expenses) Homeowners Insurance
Coverage E (Personal Liability) Homeowners Insurance
Coverage F (Medical Payments) Homeowners Insurance

You may also be interested in viewing the following videos which discuss the main points you need to know about taking out a home insurance policy.

Types Of Contents Coverage Home Insurance

There are two ways that you can insure your personal property with a coverage c policy: actual cash value and replacement cost.

Actual Cash Value

With an actual cash value policy, the money you receive in your settlement claim will be determined by the depreciated value of the loss that you are claiming for. This amount will be roughly the same as the price you would expect to pay for a similar used item.

The advantage of having an actual cash value policy is that you can insure yourself at less expense. However, the disadvantage is that your insurer will only pay you around 50% of the historic value of your loss.

So even though this policy works out better in the short-term, in the long run, you end up losing out because you are not compensated for the full value of your loss.

Replacement Cost

With a replacement cost policy you are compensated for the full amount of what you originally paid for the item you are claiming for, or for what that item would cost to buy again from new.

For example, if your bike was insured for $500 and it was stolen, your replacement cost policy will provide you with a bicycle of similar specification, even if that means giving you a replacement bike of higher value than your original.

This policy is more expensive to take out, but provides you with greater financial coverage and makes recovering from a loss much easier as you will quickly be able to buy a replacement item.

Which One Should You Get?

It is generally recommended that you purchase the replacement cost option, because although it is more expensive than cash value insurance, you can receive up to 40% more if you ever need to make a claim on your personal property insurance.

For example, if you insure several items with a total replacement cost of $100,000, you will receive the full amount, minus your deductible, to replace your items when you make a claim.

If however, you were covered with a cash value policy, then you would only receive $60,000-$70,000 in your claim settlement and be left to pay the remaining $30,000-$40,000 by yourself.

If you can’t afford to go for the full replacement cost coverage option initially, there is nothing wrong with going with an actual cash value policy and then upgrading to full coverage later on.

It is important to note though, that if you do opt for replacement cost coverage that you actually do replace your personal property in the event that you make a claim. Until you replace your property, your insurance company will only pay you the depreciated or used value in your settlement claim.

Can You Afford To Stay Insured?

The important point to remember when it comes to insuring yourself against monetary loss, is to always insure at a level which you can afford to maintain.

A mistake you definitely want to avoid making is to get the best coverage, but then struggle to pay for it each month. This will not only affect the quality of the life you live by reducing your disposal income, but could also put you at risk of losing your insurance coverage and maybe even your home if you can’t afford to pay your bills.

So the best policy to adopt when it comes to insuring your home is to aim high but start low, and then gradually insure yourself against more risks when you have the money available to do so.

If you are a residential owner, your basic homeowners insurance policy should come with a standard property coverage of 50-75% of your coverage A building limit, so this might be enough to get you started.

However, whilst this can be handy if you have relatively inexpensive personal property that you would like insured, if you have very high-end expensive personal property, then the automatic coverage provided to you by your homeowners insurance policy may not be enough to adequately insure you.

Finally on the subject of insurance costs, insurance companies have apparently discovered a relationship between credit management and insurance losses. Consequently, if you have a low credit score, then you will probably end up paying more for your insurance policy than someone who has a higher credit score as discussed in the video below.

Insuring Yourself At The Right Limits

Rather than just blindly accepting the basic coverage C homeowners insurance policy, make sure that you look at exactly what contents coverage limit you are getting.

If you find that you are not receiving enough coverage for your personal property, be sure to customize the insurance policy to cater to your exact needs and requirements as the basic policy could leave you exposed to unnecessary financial risk.

The best way to determine whether you are getting adequate financial protection is to take a look around your house at the items you would expect your insurance policy to cover you against, and then to make an estimate of the value of those items. If possible, document each item with receipts and a photograph and list them in a personal property inventory.

Doing all this should give you a rough idea as to the coverage limit that you are likely to need. When you do set a limit on your policy however, it is generally best to do so around 10-20% higher than your original estimate so as to allow for any errors in the valuation process.

Higher coverage limits will mean higher premium costs, but the marginal cost of insuring at a higher limit is usually quite low which makes taking out an adequate level of coverage worthwhile and cost-effective. It is also true that you will be able to reduce your premium rates if you choose to take on higher deductibles.

Overall, coverage C personal property insurance is something that is definitely worth having, especially if you have expensive items in your home that you would like to protect against financial loss.

Taking Out Extended Personal Property Coverage

Whilst personal property insurance does provide you with a significant degree of financial protection against the loss, damage or destruction of items in your home, there are certain items which receive limited coverage due to their high value nature.

Some of the items which receive limited coverage with personal property insurance are:

• Money (both foreign and domestic currency)
• Jewelry
• Watches
• Silverware
• Fur coats

Such items will usually receive a combined coverage limit of $1000, which for most people will not be enough.

As a result, it is worth checking to see what items receive limited coverage under your standard policy agreement, as you will most likely need to specifically list your high value items in order to insure them at an adequate level. This will involve extending your policy coverage, and will come at greater expense.

Personal Property Insurance Exclusions

Just are there are items which receive limited coverage with personal property insurance, there are also items which will be excluded entirely from your policy. This can include:

• Non accidental loss/Damage: Basically anything that wears out or breaks down due to normal usage will not be covered by your insurance policy.
  
• Controllable loss/Damage: If you break or damage something on purpose, such as throwing an object at a TV screen, that will not be covered.
  
• Extreme weather: Whilst you are protected against normal weather conditions, you may receive limited or no coverage for damage caused by earthquakes or severe floods.
  
• War: If your country is invaded and you suffer loss or damage of your personal property, your insurer will not provide you with any compensation for those losses.

For the large majority of people, the items in your home should be sufficiently insured so that under most circumstances, you will be able to recover quickly and replace lost or damaged items.

However, you should still make yourself aware of what you will receive limited or no insurance coverage for, as those limitations and exclusions will leave gaps in your policy that will subsequently expose you to a potential future uninsured financial loss.

If you consider those uninsured loses to be significant, you should then look for other insurance policies to help you close those gaps and reduce the financial risk that you are exposed to.