Personal Property Insurance
Most homeowners know the importance of insurance to protect their home in the event of a fire or other disaster but few stop to realize the importance of personal property insurance. Personal property insurance is coverage that is specifically designed to go along with a homeowner's insurance policy. It provides coverage for things such as furniture, clothing, appliances and other items that are not actually part of the home’s structure. Many homeowners’ policies automatically provide coverage for personal property but this depends highly upon the policy itself as well as the carrier. Most that do offer the coverage as part of the homeowners’ policy provide 40 percent of the amount of insurance for coverage. This means that if your homeowners’ policy shows that you have insurance for up to $200,000 then $80,000 of that coverage is meant for personal property. This will help to replace furnishings and other items in the event that your home is destroyed. When choosing personal property insurance there are a few things that you need to keep in mind.
One very important thing that you need to consider is the difference between replacement cost and actual cash value. If you purchased a new couch a few years ago and it cost you $500 then this is the actual cash value of that item at the time that it was purchased. However, the item is not worth that much money now. If for example you bought the couch five years ago then it would be worth much less today because of depreciation. The actual cash value right now would be considerably less. If your personal property insurance policy provides actual cash value coverage then you are only getting reimbursed for what your furnishings and other items are worth today, which again could be substantially less than what you paid for them. If your policy reimburses replacement costs then you would receive the amount that the same couch or one similar would cost today. This could be significantly more than what you paid several years ago. Be certain that you check the policy to see which coverage is included.
You should also understand that all of the items in your home are not going to be eligible for replacement costs. Belongings that are not eligible are often either antiques or other rare items or they are items that are outdated or considered to not be in good working condition. There are also limits normally placed on replacement costs. This is something else that you will need to check your policy for very carefully. If for instance you have a large amount of jewelry then some of that jewelry may not be covered unless you identify it separately and provide a professional appraisal for the jewelry pieces. Many companies put limits on certain items that homeowners tend to own several of such as pieces of jewelry, collectibles and other items. Be certain that you check your policy for caps on certain items and ensure that you have valuable pieces appraised and written specifically into your policy. Limits may also be placed on musical instruments, cameras, fur coats and sporting equipment.
It is very important that you estimate the value of your personal property to ensure that you have enough coverage. You can write up a personal property spreadsheet to ensure that you have all of your valuables covered. There are many templates online at various websites that will give you an idea of what to list and how to keep your spreadsheet organized. Doing a home inventory is important in ensuring that you receive compensation for your personal property should you ever experience the need for a claim. When submitting your claim, a personal property spreadsheet will help you to expedite the process. Be sure to keep sales receipts for all of your major purchases and you can even consider taking a video inventory of your belongings to ensure that you have everything included. Keep this video or pictures of your property as well as your personal property spreadsheet in a safe place such as a bank safe deposit box or purchase a fireproof safe if you are planning to keep these items in your home.