What Is Personal Property Insurance?

by Randolf Saint-Leger ; Updated July 27, 2017
Insurance agent with a model house.

Personal property insurance is a service offered by insurance companies to reimburse you for the repair or replacement of your personal property when it's damaged, destroyed, lost, or stolen. Personal property includes such things as furniture, consumer electronics, appliances, jewelry, and clothing.

Personal Property Insurance

If you are a homeowner, a portion of your homeowner's insurance policy covers personal property. For example, if you have a $500,000 home insurance policy, up to 40 percent of the policy covers personal items not affixed to the house such as appliances. Renters insurance, like personal property insurance, covers the personal items in your apartment. Renters insurance is fairly inexpensive, with policies ranging from $5 to $40 per month.

Cash Value Versus Replacement Cost

An important distinction is the concepts of cash value and replacement costs. A cash-based policy pays you based on cash on depreciated value. For example, if your computer cost you $2,000 two years ago but is worth $1,000 now, your insurance company will only pay $1,000. Some insurance companies offer additional coverage above the cash value. If your policy is based on replacement value, your insurance carrier will pay you $2,000 or the replacement value of your computer. Policies based on replacement cost can be as much as 10 percent more costly than a cash-based policy. A basic renter's insurance policy is based on fixed replacement cost. Thus, a $25,000 policy covers all of your possessions at a replacement cost for that amount.

Exceptions

Outdated or obsolete items are not covered under replacement value even if you purchased a replacement rider as part of your insurance policy. Other items not usually covered are antiques, firearms, jewelry above a certain value, stamp and coin collections, fine art, cameras, furs, silverware, and musical instruments. For these items, some insurance companies may simply issue a separate rider on your homeowner's or renter's policy, but in most cases, a separate policy is generally required.

Valuing Personal Property

Take inventory of the items in your home or apartment before taking out a personal property insurance policy. A good practice is to keep all receipts and if possible take pictures and video recordings of personal items. Also ask the insurance agent about which items have to be appraised and what are the limits of replacement value items under coverage.

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