Why insure your property?
Property insurance covers risk from loss or damage to your
personal property. Even the smallest residence can contain
property worth thousands of dollars--for instance, an
entertainment or sound system, home computer, or jewelry. If
a catastrophe struck tomorrow, and you could afford to
replace everything you own, then you may not need property
insurance. If that isn't the case, then it's likely you need
Homeowner policies cover personal
property to some extent
In addition to your home, a
standard homeowners policy also covers personal property,
meaning articles you own other than land and buildings. Your
personal property consists of the contents of your house
(like furniture, clothing, and stereo equipment, as well as
outdoor items like sporting equipment and gardening tools).
Generally, the limit for personal property coverage is
stated as a percentage of the dwelling coverage amount
listed within the policy.
If you own a condominium or cooperative
unit, your homeowners insurance provides coverage for your
personal property and any portion of the unit you own under
the terms of the condominium or cooperative documents.
Similar to a homeowner, you must choose a specific amount of
coverage for the building. It is crucial to determine how
much responsibility you have under the condominium or
cooperative documents. In these types of situations
one should never guess what these amounts or percentages
are. It is advisable to find out for sure and if
possible receive this information in writing. Then
keep it in a safe place in case you need it in the future.
Homeowners policies have set limits
Below are some examples of the standard
limits for particular categories of personal property:
Homeowners policies set specific dollar limits for
particular categories of personal property in a section
entitled Special Limits of Liability. Note that for some
categories, the policy specifies a limit only for theft, not
for damage or destruction. The reason is that items such as
jewelry, firearms, and furs are especially susceptible to
theft, and insurance companies want to limit their exposure
to these fairly common incidents. The damage or destruction
of these items is less common, and insurance companies are
willing to cover them up to their actual cash value.
- $200 for money, bank notes, bullion,
gold, silver, coins, and metals
- $1,000 for securities, accounts, deeds,
letters of credit, notes other than bank notes,
manuscripts, personal records, passports, tickets, and
some other related items
- $1,000 for the theft of jewelry, furs,
watches, and precious and semi-precious stones
- $2,000 for the theft of firearms
- $2,500 for the theft of silverware,
silver-plated ware, goldware, gold-plated ware, and
- $2,500 for property at the residence
used for business purposes
- $250 for property used away from the
residence for business purposes
*Of course, depending on your policy's
type, limits and endorsements these figures may or may not
Chances are, the value of many of your personal belongings
may exceed the limits in your homeowners policy. Only
you know for certain. That's why you have the option
of increasing these specific limits by purchasing either a
Scheduled Personal Property endorsement or a floater. You
may need an increased jewelry limit, for instance, for
covering engagement or wedding rings. If you buy a personal
property rider, you must be able to verify the cost and
condition of the item. Photos or a video can be used to
inventory your property. However, you should be sure to keep
the inventory away from the premises (i.e., safe deposit
box). Professional appraisals are needed for certain items,
such as jewelry, antiques, or camera equipment (beyond a
Renters need property insurance, too
Many renters are under the
mistaken belief that they are covered under their landlord's
homeowners insurance policy. This is not true. Your
landlord's policy covers the building itself, not the
personal belongings of you or other tenants. The fact that
you pay rent instead of a mortgage payment doesn't make your
personal possessions any less valuable. By taking out a
renters insurance policy, you can cover your personal
property from loss or damage that results from broken pipes,
fire, theft or any other event specified in the policy.
In fact, renters may even be more likely to suffer from a
loss of personal belongings because they live in close
proximity to other individuals and families.
Renters insurance also protects you from
liability claims against you if someone suffers an injury or
property damage because of something you did or didn't do.
For example, if you forget to turn your stove off, and your
apartment catches fire and destroys the building, you could
be held liable by the landlord. Your renters insurance
policy provides a set amount of liability protection.
In addition to protecting you from
property loss or damage and liability claims, renters
insurance (HO4) is very reasonably priced.
Protect your possessions wherever they
Property insurance may protect your possessions wherever
they are. For example, if you are on vacation and lose a
valuable item, as long as the loss is by a covered peril or
event, in most cases the location doesn't matter. Your
policy will specify covered perils and events.
How much property coverage do you need?
To determine how much property insurance coverage you need,
make an inventory of all your home's contents. Don't forget
to include furniture, appliances, jewelry, artwork, and the
contents of your closets, cabinets and the toy chest. When
possible, list the serial number, date and cost of purchase.
Include receipts if possible. An easy way to inventory your
possessions is to use a video camera or take photos. When
using a video camera, you can talk about the specific items,
their cost, and when you bought them. Ideally, you would
want enough insurance coverage to replace your possessions
if they were destroyed.
Keep a copy of your inventory in a
location away from your home, like a safety deposit box, or
maybe at a close friend or relative's house. This way, if
your home is destroyed, your inventory list will be safe at
another location. When you make major purchases, remember to
add them to your inventory and check with your insurer--you
may need to increase your coverage levels.
Two methods to determine value
Insurance companies use one of two methods to determine the
value of property:
- Replacement cost--pays you the cost of
replacing damaged property, with no deduction for
depreciation, but with a maximum dollar amount.
- Actual Cash Value--pays you an amount
equal to the replacement value of damaged property minus
a depreciation allowance.
Unless a policy specifically states that
property is covered for its replacement value, coverage is
for the lower, actual cash value. Check your policy, or ask
your insurance agent or representative if you are not sure
what level of coverage you have.
Periodically review your existing
Review your existing homeowners or renters policy to make
sure you have enough coverage for all valuable possessions.
Periodically review your coverage to make sure it is keeping
pace with new purchases and/or gifts you have received.
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Please Note: The
information contained in this Web site is provided solely as a source of
general information and resource. It is a not a statement of
contract and coverage may not apply in all areas or circumstances. For a complete
description of coverages, always read the insurance policy, including