What is personal property coverage and how much do I need?

Personal property coverage is the portion of a home, condo, or renters insurance policy that covers your belongings, such as clothing and electronics. A simple way to think about what qualifies as personal property is to imagine turning your house upside down. Everything that falls out is your personal property.

If your belongings are damaged or destroyed in a covered loss like a fire or break-in, insurance will help pay to repair or replace them, up to your coverage limit. Understanding how personal property coverage works can help you decide how much coverage you need and when to file a claim.

How personal property insurance works

Personal property coverage (or Coverage C) is included in standard homeowners, condo, and renters insurance policies. If your belongings are damaged or destroyed in a covered loss, your insurance policy will provide a payout to recoup your losses.

It's important to note that personal property insurance has a coverage limit, which is the maximum amount your insurer will pay if your claim is approved. This type of coverage also has a deductible — the amount policyholders are required to cover out of pocket — which is subtracted from your claim payout. 

Home insurance companies often provide several options for deductibles, which you choose when you purchase the policy. If you select a higher deductible, your policy will cost less; conversely, a lower deductible policy will cost more. 

What does personal property insurance cover?

Personal property insurance covers most items inside your home and elsewhere on your property, like a garage or shed. Here are some examples of possessions that are covered under a standard policy:

• Clothing

• Electronics

• Furniture

• Home decor

• Small appliances

• Sports equipment

• Tools

Conversely, your policy wouldn’t cover a household HVAC system. That’s considered part of the structure of your home and covered under dwelling coverage. 

Coverage away from home

Your personal property coverage can also cover items in your car, as well as belongings damaged, destroyed, or stolen while you’re traveling. This is called “off-premises coverage.” However, your policy’s off-premises coverage limit may be less than your on-premises coverage for items kept at your residence.

Covered perils: named perils vs. open perils

Personal property coverage generally covers damage due to specific hazards (called named perils) outlined in your policy. You can check your policy documents or ask your insurer to find out what perils are included. 

Some of the most common perils are:

• Fire

• Lightning

• Theft

• Windstorms and hail

• Explosions

• Smoke

• Theft

• Vandalism

You might also be able to upgrade your coverage to open-perils coverage for an additional cost. With open-perils coverage, all damage is covered unless caused by a peril specifically excluded by your policy.

Types of personal property coverage

Standard homeowners, condo, and renters policies typically cover personal property on an actual cash value (ACV) basis. For an added cost, you may be able to upgrade your policy to cover personal property on a replacement cost value (RCV) basis.

The biggest difference between replacement cost vs. actual cash value policies is your settlement amount after a claim.

Actual cash value vs. replacement cost value coverage

If you have an ACV policy, your personal belongings are covered at their depreciated value, which accounts for things like age and wear and tear. An RCV policy does not factor in depreciation. Claim payments reflect today’s market value of your lost or damaged items (minus your deductible). 

ACV personal property insurance policies are less expensive because they offer smaller claim payouts. In contrast, RCV policies are more expensive, but they pay a larger settlement to replace your items in the event of covered damage.

Special limits for high-value items

Personal property insurance covers certain items at a lower limit than others. This is referred to as a sub-limit, and it typically applies to high-value items such as fine art, jewelry, watches, collectibles, furs, firearms, and electronics. 

If you want to insure these types of belongings, it’s important to know that they may be covered at a separate, lower coverage limit than your general personal property insurance limit. For example, your coverage limit for electronics might only be $1,000, which may not be enough to cover all the electronics in your home if they were destroyed by a covered peril.

Personal property vs. scheduled personal property

If you need higher levels of coverage for items that have a sub-limit, you can add a scheduled personal property endorsement to your policy. Scheduling items enables you to insure high-value belongings at their full value.

Such items might include:

• Jewelry

• Furs

• Cameras

• Musical instruments

• Fine art

• Golf equipment

• Stamps and coins

Scheduled items are typically covered against all perils, except for those that are explicitly excluded from your policy. If any of your scheduled items are lost or damaged, you can file a claim to get reimbursed for an agreed-upon amount. There’s usually no deductible required, but some items may require an appraisal to prove their value.

How much personal property coverage do you need?

Determining how much personal property coverage you need is key to ensuring you can repair or replace your belongings if needed. Under a standard home insurance policy, the personal property insurance coverage limit is typically a percentage of the dwelling coverage limit — most often between 50 to 70%, according to the Insurance Information Institute. 

So, if your dwelling policy limit is $300,000, your personal property limit might be $150,000. Whether that is enough depends on the value of your belongings.  

If the percentage-based coverage limit isn’t enough to cover the full value of the items you own, you can often set custom personal property coverage limits or add an endorsement that would provide more protection if you had a covered loss.

Inventory your belongings

One of the best ways to ensure you have enough personal property protection is to take a home inventory, documenting all items in your home. This can also come in handy should you need to file a claim.

To start a home inventory, work room by room and gather the following information for all of your belongings:

• Year purchased

• Model and brand

• Serial number (if applicable)

• Purchase price (or an estimate)

• Photo or video of the item

Once your inventory is complete, you can add up the value of all your items and use that number to inform your personal property coverage limit. Make sure to keep your home inventory updated if you purchase new items or get rid of things. If the total value of your items changes significantly, call your insurance agent and update your personal property coverage limit.

Can you opt out of personal property coverage?

Yes, some insurance companies allow you to opt out of personal property insurance when purchasing a homeowners insurance policy, but this depends on the insurer and the specific policy. 

While opting out of personal property insurance may result in a lower premium, it’s not usually advisable. If you decline personal property insurance and your possessions are destroyed in a total loss, the savings likely won’t add up to the entire cost of replacing them.

If you’re considering dropping personal property insurance to lower your insurance costs, there are better ways to save money. Raising your deductible, shopping around for coverage, asking about discounts, or making safety or security upgrades to your home can potentially reduce your rate.