Replacement cost coverage of personal property for home insurance

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The personal property coverage in a home insurance policy, or Coverage C, can protect your possessions in the event of a covered peril like fire or theft.

Here’s what you need to know about coverage for the replacement cost of personal property:

What is personal property replacement cost coverage?

Personal property replacement cost coverage is the part of a home insurance policy that pays to repair or replace your personal property if a covered event – such as a severe windstorm, fire or flood – damages or destroys them.

With this type of coverage, your home insurance company will reimburse you for the cost of a new item of similar value. Replacement cost coverage does not take depreciation into account. It doesn’t matter when you bought the item or how many you used before it was damaged or destroyed, you can get enough money to buy a new one.

Let’s say you bought a sofa five years ago for $3,000 and a fire breaks out, causing it to burst into flames. If you have personal property replacement cost coverage, your insurer will reimburse you for what it costs to replace your sofa, which is probably over $3,000 today, minus your deductible (the amount you you pay out of pocket for a covered claim).

If you need to protect your home and belongings with home insurance, Credible can help. You get quotes from multiple insurers to find a policy that fits your needs.

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Learn more: How much does home insurance cost?

Other Levels of Coverage for Personal Property

Replacement cost isn’t the only type of coverage you can get for your personal property. You can also choose one of the following policy types:

  • Actual cash value: Actual cash value (ACV) takes into account the value of your assets at the time of loss. Payment takes depreciation into account. This means that the amount you receive from your insurer may or may not cover the full cost of repairing or replacing an item. Since most items lose value over time, the ACV is often less than what you originally paid. If you bought a kitchen table for $1,000 several years ago, but it’s only worth $700 today, your insurer will reimburse you $700.
  • Extended replacement cost: Extended Replacement Cost helps cover higher rebuilding costs that are beyond your control. If your home suffers damage after a major disaster and the cost of repairing or rebuilding it exceeds your home’s coverage, this add-on, or endorsement, can increase your home’s limit by an additional 10% to 50%. It also increases your personal property limit, since personal property coverage is typically 50% of your home coverage in a standard home insurance policy.
  • Guaranteed replacement cost: Guaranteed Replacement Cost provides coverage for the full replacement cost of your home, even if the amount exceeds your policy limits. This is an extension of standard replacement cost insurance, which will pay for materials to rebuild your home up to a set limit.

Keep in mind: Generally, the more coverage you purchase, the higher your premium will be. For example, if you choose guaranteed replacement cost coverage, your premium will be higher than if you simply choose actual cash value coverage.

Check: What is Extended Replacement Cost?

What does personal property insurance cover?

Personal property insurance can cover a variety of personal effects. Personal property is usually anything you bring into your home, rather than appliances that were already installed when you bought them.

What does personal property coverage exclude?

Personal property insurance does not cover everything you own. It generally excludes the following:

  • Cars
  • Pets
  • Items you rent from someone else
  • Credit card

Fortunately, you can purchase other types of insurance to protect these valuables. If you own a vehicle, auto insurance is not only a wise investment, but it is also required in most states. Pet insurance is worth it if you have a pet.

Good to know: If a peril not covered by a standard home insurance policy (such as a flood or an earthquake) causes damage to your personal property, your insurer will not reimburse you. It’s a good idea to check your insurance policy so you know exactly what risks your insurance covers.

How to Calculate the Replacement Cost of Personal Property

Although an insurance agent can help you calculate the replacement cost of your personal property, you can also estimate it yourself before choosing a policy. If you’re going the DIY route, follow these steps:

  1. Create an inventory of your possessions. Go through every room in your house and make a list of all your personal possessions. Don’t forget to exclude your car, pet, or anything else your personal property policy doesn’t cover. Once you have a list of items covered, take photos or videos of them to keep as documentation. It’s also a good idea to record a description of each along with all applicable model and serial numbers.
  2. Determine the value of your items. Write down how much each item would cost to purchase. You may need to do some research online to do this. If you have multiple items in a category, like small appliances, you might want to find a value that captures them all. Add these numbers together to get the total value of all your possessions.
  3. Keep your list in a safe place. Consider creating a digital version of your list so you can easily access it after a natural disaster or other covered event.

Point: You can also hire a professional appraiser or contractor to get a more accurate idea of ​​the replacement cost of your belongings.

How much personal property coverage do I need?

You need sufficient insurance coverage to cover the full value of your personal effects. Insurance companies usually set your personal property coverage at a certain percentage of your home coverage, usually between 50% and 70%, but this might not be enough coverage for you.

Consider adding $10,000 on top of your total estimated replacement cost per family member in your home as a cushion. Remember that personal property coverage usually comes with a deductible, so choose an amount you feel comfortable paying in the event of a disaster.

Learn more: What is the guaranteed replacement cost?

Personal Property Replacement Cost Coverage Limits

Like other home insurance coverage, your personal property coverage has a limit. If you exceed the reimbursement limit set by your insurer, you will have to pay the difference. Let’s say you have $20,000 worth of furniture stolen: if you only have a coverage limit of $15,000, you’ll lose $5,000.

Also, home insurance policies usually have sub-limits on big ticket items, like fine art or jewelry. For complete protection, you may want to plan for those expensive items (buy extra coverage for them).

What is scheduled movable property?

If you own big-ticket items, the personal property insurance provided may provide you with additional peace of mind. This adds more coverage to your standard home insurance policy. Although it generally carries higher premiums, it offers more protection, including additional risks.

A programmed add-on for personal property is worth considering if you want to protect any of these high-value assets:

  • Jewelry
  • Masterpieces
  • Antiques
  • Musical instruments
  • Collectibles
  • Fire arms
  • Cameras
  • Laptop

Good to know: You may be able to opt for a lower deductible or no deductible for the planned personal effects. Just be sure to ask your insurer if you can do it.

Why You Should Consider Personal Property Replacement Cost Coverage

You have worked hard for everything you have. That’s why covering the cost new of your personal property can be a wise investment. It can provide you with the funds you need to repair or replace an item after a covered loss without deduction for depreciation. With personal property replacement cost coverage, you won’t have to worry about paying more than your deductible to cover the damage.

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Keep reading: How to change home insurance

Disclaimer: All insurance related services are provided by Young Alfred.

About the Author

Anna Baluch

Anna Baluch is a freelance personal finance writer with years of experience writing for well-known personal finance and business media outlets. His work can be found on media like The Balance, Freedom Debt Relief, LendingTree, Credit Karma, Nav and RateGenius. She holds a bachelor’s degree in marketing from Northwood University and an MBA from Roosevelt University.

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