How Much Personal Property Coverage Do You Need?
When you purchase your home insurance policy, do not overlook the importance of properly protecting what is inside of your home with personal property insurance. The sheer number of items within your home and how much emotional value you place on many of them may make it seem very difficult to quantify exactly how valuable your personal property is. If you are faced with losing some of those cherished possessions to a fire or some other disaster, having the right amount of coverage for the contents of your home is probably the only way to affect how completely you can rebuild after a disaster.
Homeowners insurance policies provide personal property coverage for loss or damage to your personal belongings including clothing, furniture, appliances and most other items in your home. This coverage gives you the ability to at least receive some financial reimbursement for those items that may seem irreplaceable. Most home insurance policies start coverage for personal property at approximately 50% to 70% of the amount of insurance you have on the structure of your home, and in many cases this may not be sufficient.
Do you need more personal property coverage? The best way to determine this is to prepare a personal property inventory, or a detailed list of everything you own and how much each item would cost to replace.
Insurance companies typically group like items into categories and assign coverage limits for those categories. For example, your homeowners insurance policy might limit jewelry coverage to $1,000 per piece of jewelry and $2,500 for all of the jewelry in the household. If you have a piece of jewelry that is worth $5,000, the basic coverage provided in your policy is inadequate.
There are two ways to increase the coverage limits for your special, high-value possessions. First, you can increase the “special limits of liability” for the categories in which you have more valuable items. In the example above, it would be wise to increase the entire jewelry category limit from $2,500 to $5,000 or more. Most insurance companies will increase the limit on any category of covered items in $1,000 increments, but there will likely be a ceiling to which you can raise any category limit.
If increasing the entire category limit is not the right way to get adequate coverage, you can use a scheduled personal property rider to increase the coverage limit on a certain item or items. This is also advantageous because these riders provide all-risk coverage, which means that the scheduled items are covered for all risks, not just the basic “covered perils” outlined in the main home insurance policy. In addition, scheduled personal property is typically not subject to the deductible that applies to all other losses.
Replacement Cost Coverage vs. Actual Cash Value Coverage
Like the dwelling coverage in your homeowners insurance policy, your personal property coverage can be based on your property’s actual cash value or replacement cost. Actual cash value policies pay to replace your possessions minus a deduction for depreciation. Replacement cost policies reimburse you for the actual cost of replacing the items with no deduction for depreciation. Replacement cost policies offer the best protection and ensure that you will be able to replace your possessions with similar ones at today’s process. This type of coverage generally costs about 10% more than actual cash value coverage, but is well worth the extra cost in the event of a loss.
Do you have sufficient coverage for your personal property? Do you have a significant amount of valuables, or just a few valuable pieces of jewelry or art? Do you have a home full of cherished, beloved possessions? We can help you determine how to approach coverage for your personal property and ensure that you will be properly reimbursed if you have a loss. Call us today to understand more about the importance of having the right amount of personal property insurance.
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