Personal property insurance: Are you covered?

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Many belongings are kept in your home, including photo books, electronic devices, furniture, and work materials. Personal belongings are not only important for personal attachment. Homeowners insurance policies also include this standard coverage.

Personal property coverage protects you and your home from common perils such as theft, fire, and falling objects. Your home insurance policy has provisions to help you restore valuable items, whether your collectibles are damaged by fire or your high-tech equipment is the target of a home robbery.

What is personal property insurance?

Personal property insurance covers the contents of your house so they can be repaired and replaced following a covered loss. Your homeowners insurance policy will cover your TV, music instruments, and sports paraphernalia.

In 2018, 98% of homeowners insurance claims were due to theft and property damage. This statistic shows how important personal property insurance is. It can result in thousands of dollars in loss. In order to provide evidence for future claims, insurers will require proof of damages. It is recommended that homeowners keep an inventory of all their belongings. 43% of homeowners said that they had an inventory of their home in 2020.

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It may be advantageous to buy extended coverage limits for personal property such as wedding rings, instruments, or artwork, because each property is different. If you have high-value items that are affected by a covered loss your home insurance policy might not provide enough coverage to cover them all.

Many homeowners insurance companies offer scheduled property coverage to policyholders as an endorsement. This allows them to provide extended coverage for more valuable possessions and perils. Many scheduled personal property endorsements cover losses that are not excluded.

What is personal property insurance?

Personal property insurance covers you to pay for the repair or replacement of your belongings in case they are damaged or destroyed by a covered peril. Once you have met your deductible, your insurance company will reimburse your for any losses covered by your policy.

Personal property insurance is offered by insurance companies in different levels of coverage. This covers the maximum amount they will pay you for a covered loss. You can select the coverage level that you want based on how valuable your items are when you buy a policy. You’ll usually pay more for higher levels of coverage.

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Personal property policies typically cover your belongings from 50-70% under your dwelling insurance. You may need more or less coverage depending on how valuable your possessions are.

What is personal property insurance?

Your personal property policy covers all your personal possessions, no matter where they are kept. This includes your home, yard, garage, shed, car and garage, as well as hotels when you travel. Your items are not covered by any covered losses. If your mower breaks down or your refrigerator needs to be upgraded, your insurer will likely not cover your claim.

Some people are satisfied with the coverage they have, but others may need more protection. Consider the value of your personal property and where you live before you purchase personal property insurance. Although raising your coverage limit will increase the rate, it is still a fraction of the cost you would have to pay if you had no other options.

There are two types of policy options available under the umbrella personal property coverage: open peril and named. It is important that you understand the differences and decide which policy makes sense.

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Open peril policy

An open peril policy protects your personal property from any damage not specifically mentioned in your policy. An open peril policy could cover the following situations:

  • Accidentally breaking an appliance
  • A pet animal enters your home
  • Boiler explosions
  • Breaking your laptop
  • After a cooking fire, you can damage your stove.
  • Losing valuable items
  • After a storm, plants are destroyed
  • After a storm, replace patio furniture damaged
  • Furniture staining
  • Tree falls on a play structure

Open peril policies may not be able to cover all situations. Personal property insurance policies typically do not cover damage resulting from:

  • Floods or earthquakes can cause damage.
  • Foundation cracking
  • Failure in construction
  • Vermin, insects, rodents and pet damage
  • Mechanical breakdowns
  • Mold
  • Wear and tear from natural wear
  • Corrosion and rust

Open peril policies offer the best protection because you can file a claim for nearly anything. They are however more costly than named peril insurance.

Named peril policy

An open peril policy has a named peril policy. A named peril policy will cover only certain losses that you specifically state in your insurance policy. Named perils typically cover damage that is caused by:

  • Frozen pipes
  • Lightning can cause a fire
  • Riots
  • Roof damage after a hail storm
  • Theft
  • Vandalism
  • Water damage
  • Wildfire
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Named peril policies do not cover certain losses, much like an open peril insurance. These losses are usually the same as open policies but exclude damage due to mold, earthquakes, wear, tear, and rust.

You will need to decide how much coverage you require for either policy. This will depend on your item’s value, your location, your willingness to take some risk, and your ability to pay for replacement costs.

If you live in an area prone to wildfires, for instance, you’ll be covered by a named peril insurance. You’ll be able to increase your coverage because fire damage can potentially cause the destruction of your entire house and your belongings.

Things to Consider

After you have paid your deductible, you will be reimbursed by your insurance company if you file a claim for a covered event. The amount of money you receive depends on how your insurance company reimburses you. This is where Actual Cash Valu (ACV), versus Replacement Cash Valu (RCV), comes in to play.

An ACV policy will reimburse you for losses that have depreciation. If you buy a laptop five years ago for $1,000, it will now be worth $500. The insurance company would pay $500 to replace the laptop if it was damaged by a covered loss. Personal property policies usually include ACV by default.

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An RCV policy, on the other hand does not include depreciation. Your insurance company will cover the cost of replacing damaged or destroyed items up to their full value. An RCV policy will pay $1,000 for a replacement laptop if it is damaged or stolen. RCV policies offer a better deal and can be added to for a higher premium.

What is the average price I should expect to pay for Personal Insurance?

Standard homeowners insurance policies include personal property coverage almost every year. The average cost for homeowners insurance at $250,000 per year is $1,312 Your premium could be higher or lower depending on the location of your home, its age, and the coverage limits.

The default coverage level may not be sufficient for personal items, particularly if your valuables are included. It is a smart idea to purchase an enhanced policy if you own jewelry, furs, collectibles, or expensive electronics. This will increase your annual premium.

Your personal property insurance rate will also vary depending on whether you have an RCV or ACV policy. ACV policies are often the default option, and they are generally cheaper. However, you can change your policy to RCV. This will increase the cost.

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Although homeowners insurance can be costly, there are many ways to save money on your premium. These are some ways to lower your personal property insurance premium.

  • Remodel your home: You can expect to pay higher for homeowners insurance if you have an older house. Older homes are more likely to be the subject of claims. You can save money by upgrading your appliances, replacing the roof, or installing safety equipment such as a security system.
    Your credit score should be improved. People with lower credit scores are more likely to pay higher homeowner’s insurance premiums. Your insurance provider may lower your annual rate if you have a higher credit score.
  • Do not file claims. The higher your insurance rates, the more claims you have filed. Do not file claims whenever you can. Even if the cost is minimal, you can repair or replace cheap items. If you suffer major losses that exceed a few hundred dollars, it is best to file a claim.

Bottom line

Personal property insurance is essential. The right policy will suit your needs. You should ensure that your policy covers your personal property and family in the event of a loss. To determine the coverage you need and the type of policy you want, you must decide how much you are able to afford.

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Although personal property coverage can be an expensive investment, it could help you save thousands in the long-term.