Do I need personal property insurance?

If an accident occurred, very few of us could afford to replace all of our “stuff’” out of pocket.

We all have lots of personal possessions, in many cases, we have far too many. Making sure your personal property is protected in the event of a fire or major weather incident is important as very few of us could afford to replace all of our “stuff’” out of pocket.

While homeowners insurance does offer protection for your belongings there are limits, especially for specific items, which can easily be exceeded, especially during a major disaster.

Here is a quick overview of what is covered by a standard policy, what you can do to increase coverage levels and how to save a few bucks on your personal property protection.

What’s Covered by Homeowners Insurance

A standard homeowners policy is called an HO-3 policy. It is the most common type of coverage for homes and provides protection for a wide variety of property types but coverage is somewhat limited for personal contents.

If you have a HO-3 homeowners insurance policy, your personal contents are usually covered from 40 percent to 75 percent of the insured value of the building. The percentage of the value dedicated to personal property will vary by policy so make sure you have read your policy and understand your personal contents limit.

A typical HO-3 homeowners policy will cap coverage for certain types of personal property. Collectibles and high-end possessions such as jewelry, artwork, firearms and antiques are all capped at $1,000 to $2,000. Check your policy for the exact limits.

If you have any of these items that are valued above the coverage cap you should consider a scheduled personal property endorsement rider that expands this coverage.

Advantages Offered by a Scheduled Personal Property Endorsement

A scheduled personal property rider will cover listed property at a specific amount which is called a “value loss settlement”. Unless the cause of the loss is specifically excluded on the policy, the insurer would pay out for any loss type at the specified amount.

As an example, if you have a painting appraised at $30,000 the payout on the painting would be $30,000, which differs from property coverage in a HO-3 homeowners policy which takes depreciation into account and only pays out the market value.

Finally, a scheduled personal property endorsement will pay out for any type of loss that is not specifically excluded in the policy whereas a homeowners policy may not cover theft, loss, or accidental destruction.

Scheduled endorsement prices vary depending on what type of possessions you are covering as well as how much coverage you need but as a rough estimate, expect to pay roughly $25 for every $1,000 worth of coverage per year.

Move to an HO-5 Policy

Moving to an HO-5 or expanded homeowners insurance from a standard HO-3 policy will expand your coverage and remove some of the limitations of the HO-3 policy.

An HO-5 policy expands your coverage and has a much higher limit for jewelry items as well as personal property that is used for business property. If you are considering an HO-5 policy, read the details regarding coverage levels and exclusions to make sure it offers the best protection for your needs.

HO-5 coverage ups personal property coverage to replacement cost so you don’t have to worry about depreciation, which can take a big dent out of your payout.

HO-5 availability is often limited to fairly new homes so it’s possible that your home may not qualify. Costs will vary but an HO-5 policy will typically be a step up in price but the increased coverage can be well worth it, especially if you have a lot of possessions that fall under a scheduled rider on a HO-3 policy.

Personal Property Coverage for Renters

Make no mistake, if you are a renter, you need renters insurance or you will be on the hook for replacing all of your property if it is destroyed. Your landlord’s insurance policy will cover their building, but not your personal property.

Renters insurance will cover the cost to replace your belongings if they are destroyed, damaged or stolen from your home. It also offers liability coverage if a guest is hurt in your home.

Renters insurance is extremely affordable with the average premium costing $188 per year according to the National Association of Insurance Commissioners (NAIC).

How to Save Money on Personal Property Coverage

Prices will vary depending on whether you choose actual cash value or replacement value and the coverage amounts that you need. Like all insurance policies, personal factors will impact your premium as well. Your credit rating, where your home is located and past homeowners insurance claims will have an affect.

Here are a few tips for lowering the cost of personal property coverage:

Credit Score: Maintain your credit score and review your credit report yearly. If you find an error, notify the credit-reporting agency immediately. If your credit score improves, ask your insurer to recalculate your premium.

Secure Your House: Insurers love safe houses so installing a monitored security system will result in a big discount. A sprinkler system can prevent fires from getting out of control and will result in a major discount.

Shop Your Coverage: Insurers rate risk differently so finding the insurer that likes your particular risk will result in the best price. We can help, simply fill out our quick and easy online quoting application and we can compare up to 12 different home insurance carriers. Get free homeowners insurance quotes and save 40% or more.