What Is Personal Property Coverage in Home Insurance?

Personal property coverage, often called contents insurance, is a key part of a home insurance policy. This coverage protects belongings within a home, such as furniture, electronics, and clothing, from financial loss due to specified events. Its purpose is to help policyholders repair or replace damaged, destroyed, or stolen possessions. This protection extends beyond the home’s physical structure, safeguarding items that furnish a living space.

Defining Covered Personal Property and Perils

Personal property in home insurance includes most movable items not part of the dwelling’s structure. Examples include household goods like sofas, tables, and beds, and personal effects such as clothing, electronics, tools, and kitchenware. It also covers valuable items like jewelry, art, and musical instruments, though specific limits may apply. Coverage often protects belongings even when away from the insured premises, such as a laptop stolen from a car.

Policies specify “perils,” which are covered events or causes of loss. Common perils include fire, smoke, theft, vandalism, and certain water damage (e.g., burst pipe). Weather events like windstorms and hail are also covered. Understanding coverage involves distinguishing between “named perils” and “open perils” policies.

A named perils policy covers only losses from events explicitly listed, such as lightning, explosion, riot, falling objects, or the weight of ice and snow. If an event is not specifically named, it is not covered. An open perils policy (also called “all perils” or “all risk”) covers damage from all causes unless specifically excluded. While most homeowners policies (HO-3) cover the dwelling on an open perils basis, personal property is often covered on a named perils basis.

Understanding Coverage Limits and Valuation

Personal property coverage is typically a percentage of dwelling coverage, which protects the home’s physical structure. This percentage commonly ranges from 50% to 70% of the dwelling coverage limit. For example, if a home’s dwelling coverage is $300,000, the personal property coverage might be set at $150,000. Policyholders may adjust this percentage based on the total value of their belongings.

When a claim is filed, the personal property valuation method significantly impacts the payout. The two primary valuation methods are Actual Cash Value (ACV) and Replacement Cost Value (RCV). Actual Cash Value (ACV) reimburses the replacement cost minus depreciation. Depreciation accounts for age and wear, meaning payout is for the item’s current “used” value. For instance, a television bought five years ago would be valued at its current worth, not its original purchase price.

Replacement Cost Value (RCV) covers the cost to replace a damaged or stolen item with a new one of similar kind and quality, without depreciation. This method allows policyholders to purchase new replacements for their lost or damaged items. While ACV policies have lower premiums, RCV policies provide greater financial protection by not factoring in depreciation. Most standard policies default to ACV for personal property, but upgrading to RCV is an option for an additional premium.

Items Requiring Specific Coverage

Certain personal property categories have limited or no coverage under standard home insurance, requiring special attention. These include high-value possessions like jewelry, furs, fine art, collectibles, firearms, and silverware. Business property, cash, and valuable papers also often have limitations. Sub-limits exist due to their high value, unique risks, or susceptibility to theft.

For example, a standard policy might have a general personal property limit of $150,000, but a jewelry sub-limit might be $1,500 to $2,500, even if the item’s actual value is higher. Without additional coverage, a policyholder would only be reimbursed up to the sub-limit for a stolen or damaged item in that category. To adequately protect these items, additional coverage is required.

Policyholders can secure additional coverage by “scheduling” items or purchasing “endorsements” or “riders” to their policy. Scheduling an item involves listing it individually with its appraised value, typically providing broader protection and higher limits, often without a deductible. Endorsements (riders or floaters) are optional add-ons that modify the basic policy to increase coverage limits or expand protection for certain perils. These adjustments ensure valuable possessions are insured for their true worth.