What is personal property insurance?

Personal property insurance is a component of a homeowners, renters, or condo policy that pays to replace your possessions if they are stolen or destroyed. This includes almost everything you own, including:

• Appliances (unless you’re a renter and your landlord owns them).
• Music and books
• Cell phones, tablets and laptops.
• Clothes and shoes.
• Dishes and kitchen utensils
• Furniture.
• Jewelry.
• Sports equipment
• TVs.

Although the term "personal property" is fairly broad, there are a few items that are almost certainly not included. A typical home insurance policy, for example, does not cover cars or pets. If you are a homeowner and rent out any of your property to an unrelated tenant, the tenant's belongings will not be covered. If you rent, your roommate's belongings will not be covered unless they are listed on your policy.

Personal property coverage is sometimes referred to as "Coverage C," after the classification it is assigned in many insurance policies.

What does personal property insurance cover?

Personal property insurance protects your belongings in the event that they are stolen, damaged, or destroyed in a covered event, such as a fire. In the insurance industry, events that cause damage are referred to as "perils."

Named perils vs. open perils

In most cases, your belongings are insured against "named perils," which means that coverage applies only to events specifically listed in your policy. An event is not covered if it is not named.

The following are the typical perils that most policies cover:

• Lightning or fire.
• Windstorm or hail.
• Explosion.
• Riot or civil commotion.
• Damage caused by aircraft.
• Damage caused by vehicles.
• Smoke.
• Vandalism or malicious mischief.
• Theft.
• Volcanic eruption.
• A falling object.
• The weight of ice, snow or sleet.
• Accidental discharge of water or steam from within certain household systems or appliances.
• Certain household systems suddenly and unintentionally tearing apart, cracking, burning, or bulging.
• Freezing of certain household systems or appliances.
• Certain unexpected, unintentional damage caused by artificially generated electric currents.

Some policies provide more comprehensive personal property coverage, referred to as "open perils" or "all risks" coverage. That is, if a peril is not expressly excluded in your policy, it is covered.

Actual cash value vs. replacement cost

If you ever need to file a personal property claim, the amount your insurer pays out is determined by which of these two coverage options you selected.

• Actual cash value. Assume you spent $500 on a laptop three years ago. It's probably worth a lot less now. If your laptop is stolen and you have actual cash value coverage, your insurer will only pay the computer's depreciated value.
• Replacement cost. Choose replacement cost coverage for your belongings if you'd rather receive enough money to buy a new laptop. This coverage is typically more expensive, but it could be worth thousands of dollars if you lose everything in a disaster.

Coverage outside your home

Many policies cover your belongings anywhere in the world, not just at home. So, if your suitcase is stolen at the airport or a storage unit burns down with your belongings inside, you'll most likely be covered — typically, 10% of your total personal property limit.

What isn’t covered by personal property insurance?

Personal property insurance generally does not cover flood or earthquake damage unless you purchase additional coverage for those disasters. If you leave your phone in a cab or drop your ring down the kitchen sink, those incidents are unlikely to be covered as well.

Here are a few other risks that are frequently overlooked:

• Acts of war.
• Neglect.
• Nuclear hazards.
• Intentional damage to your own property.

Extra personal property coverage for valuable items

For jewelry, guns, and other specified items, your insurance company may only pay up to a certain amount. (In some cases, the sublimit is only applicable to theft.)

The following are the most common items that are subject to sublimits:

Assume you have a $100,000 total personal property limit but only $1,500 in coverage for jewelry theft. What should you do if the value of your engagement ring is $2,000?

Depending on your insurer, you may have a few options for covering valuables that are worth more than your personal property sublimits.

Scheduled personal property

Scheduled personal property coverage allows you to insure a valuable item like an heirloom necklace or a work of art. These policies typically provide more coverage than a typical homeowners or renters insurance policy. For example, if you misplace the item, it may be covered. You may also be able to select a lower deductible or none at all. An appraisal may be necessary.

Blanket personal property

If you don't want to itemize and get appraisals for all of your valuables, blanket coverage may be the way to go. This endorsement increases the coverage limit for one or more categories of property (such as jewelry) to include the entire value of your collection. This coverage may be available without a deductible as well.

How much personal property insurance do you need?

You must have enough personal property insurance to cover the entire value of your belongings. For homeowners, insurance companies will frequently set your personal property coverage at a percentage of your dwelling coverage, such as 50% or 70%. However, you may be able to modify this if you believe you require more or less coverage. Meanwhile, renters can generally set their own personal property limit.

Take a home inventory if you have no idea how much your belongings are worth. Evaluate what you have room by room, especially big-ticket items like furniture and appliances. Remember to open drawers, closets, and cabinets. Taking video of the process can be beneficial in the event that you need to file a claim.

Personal property insurance typically includes a deductible, which is the amount of money deducted from your payout if you file a claim. When deciding on a deductible, think about how much money you'd be willing to pay in the event of a disaster.

How to make a personal property claim

First, consider whether making a claim is even worthwhile. If your $550 smartphone is stolen but you have a $500 deductible, a $50 payout may not be worth the effort, especially since your rate will almost certainly increase after you file the claim.

If you decide to file a claim, you should do so as soon as possible after the incident. You may be able to file online, through an app, or over the phone, depending on your insurer.

Prepare to submit supporting documentation, such as photos or video of the damage, an itemized list of what was lost, or a police report if theft occurred.

Your insurance company may require you to take steps to avoid further damage. For example, if a storm blows off a section of your roof, you should cover the hole with a tarp to prevent rain from damaging furniture and other items in the affected area. Keep your receipts if you buy supplies for this type of mitigation.

Your insurer will assess your claim and may dispatch an adjuster to your property to inspect the damage. If your claim is accepted, your deductible will be deducted from any payment.

If you have replacement cost coverage, you may be paid only the cash value of your belongings at first until you provide proof that you've replaced them.