Personal property refers to your movable effects and possessions, such as clothing, appliances, and furniture. A good rule of thumb is that if you plan to take it with you when you move out of your home, it’s probably personal property. If it’s a permanent part of the residence, it’s generally not.
Whether you’re a homeowner or a renter, you’ll usually need insurance to cover these types of belongings. Before you buy a policy, here’s what you should understand about personal property, including what qualifies, why it matters, and what kind of coverage you can get for it.
Definition and Examples of Personal Property
In insurance, personal property refers to your tangible, movable possessions, such as your clothes, electronics, and furniture. The distinction between personal property and its counterpart, real property, is that personal property is portable while real property is fixed.
For example, your countertops are a fixture of your home. They’re part of the permanent structure, which makes them real property. The blender on top of the countertop, though, doesn’t have to be there. You can move it around or throw it away altogether, which makes it personal property. The same is true for larger, non-built-in appliances, like your fridge and stove.
Understanding the distinction between the types of property is most important when buying homeowners or renters insurance. Both types of policies cover losses from damage to your personal property in certain incidents. You’ll need to know how much personal property you own to ensure your policy’s coverage limit is high enough.
Personal property coverage isn’t always restricted to the belongings within the walls of your home. Some policies will cover damaged or lost possessions that were being kept in your car or an off-site storage locker. Others protect property that is stolen while you’re traveling or while your child is away at college.
How Personal Property Works
Whether you’re a homeowner or a renter, you often have to get coverage for your personal property.
Most mortgage lenders make you get a homeowners policy to get financing. While they often care more about coverage for the land and building, they’ll also probably require you to get personal property coverage.
Landlords also often require their tenants to purchase renters insurance as a condition of the lease. One of the primary components of renters insurance is a personal property policy—an important coverage, as your landlord’s policy won’t protect your belongings.
Even if your mortgage lender or landlord doesn’t require it, it’s usually best to get insurance for your home and belongings. Both types of property can be worth a lot of money, and you don’t want to have to pay to replace them out of pocket.
You can usually only get coverage for certain kinds of damage to your personal property. Some commonly covered risks are:
- Fire and smoke
- Theft and vandalism
- Lightning and windstorms
The most popular type of homeowners policy is known as special form insurance, or HO-3. Under this policy, your insurance provider generally will accept claims only for damages to your personal property due to incidents explicitly named in your contract.
When might you need to assess your personal property? Say you move into a new apartment, and your landlord tells you to get a renters insurance policy with a minimum of $50,000 in liability coverage.
You could take this as an opportunity to get coverage for your personal property. If you calculate your possessions to equal roughly $20,000 in furniture, appliances, clothes, and the like, you could get a policy that satisfies your landlord and protects your belongings against damage.
What Personal Property Doesn’t Cover
Personal property coverage only protects against the risks outlined in your policy. Most home insurance policies are an HO-3 (or “special form”) policy. These policies typically exclude perils such as floods and earthquakes. That means if your personal property was damaged from one of these events, your policy won’t reimburse you.
If you wanted to add protection from uncovered perils, you’d either have to purchase a separate endorsement from your insurer (if they offer it) or a separate policy with another company. FEMA, for example, offers its National Flood Insurance Program to insure property owners, renters, and businesses from flood damage.
If you own valuable personal property, a standard policy might not be enough to cover it all. For example, many policies limit coverage for items like jewelry and watches. To get coverage for the entire value of these types of assets, make sure to bring up the issue with your insurance agent.
Types of Personal Property Coverage
You can get two types of coverage for your personal property: replacement cost and actual cash value (ACV). These policies calculate your proceeds for a successful claim in different ways.
Replacement cost policies cover the cost of replacing the insured property with one that is similar in type and quality up to the property’s current purchase value. However, there may be allowances for price increases. By contrast, ACV policies pay for the property’s replacement cost minus its decrease in value since the purchase date due to depreciation.
- Personal property refers to your movable items and effects, including your clothing, jewelry, and appliances.
- You can get coverage for your personal property through a homeowners insurance policy or a renters insurance policy.
- Many lenders and landlords require you to get personal property coverage to enter into a mortgage or lease with them.
- There are two types of personal property coverage. Replacement value policies cover the entire cost to replace the insured property. Actual cash value policies adjust that amount down for depreciation.