Regardless of whether you own or rent a home, protecting your belongings should be a high priority. When we say belongings, we refer to things such as furniture, jewelry, clothes, electronics, etc. If these things are damaged or get stolen, it costs a lot of money to replace them. Fortunately, your standard homeowners insurance policy will typically come to your aid by covering these items, but there are important exceptions and limitations. Read on.

What is personal property insurance?

Personal property insurance (also referred to as contents insurance or Coverage C on your homeowners policy), provides cover for your personal belongings, and often also for items that belong to blood relatives who live at the same property.

There are limits though, and these limits are typically clearly listed on your home insurance declarations page. When signing up for a home insurance policy, the default for your personal property coverage is typically set somewhere between 50% and 70% of the amount for which the home itself is covered.

What is covered by personal property insurance?

Contents insurance reimburses you if your personal property is damaged or stolen. It typically covers your belongings inside the home and garage. Even personal items in your car and hotel room can be covered, but don’t assume they are: first check the small print of your particular policy.  Most policies exclude theft while the property is away from your premises (it's referred to an off-premises theft exclusion).  Cost to include off-premises theft coverage varies from company to company but often it is about a 10% increase on your insurance premium.

This type of insurance covers you for theft and damage (due to a covered cause of loss) to your personal belongings up to the specified maximum set out in the policy.

A typical personal property insurance policy will, for example, include cover for clothing, indoor furniture, outdoor furniture, rugs, kitchen appliances, televisions, trampolines, lawn care equipment, and similar items.  Basically items that you could pick up and carry outside of the house are covered as personal property.

Even plants, trees, foliage, and shrubs are normally covered, but generally only up to a maximum of $500 per item.

Exception: Plants and trees and not covered for natural collapses or disease

What types of damages will your personal property be covered against?

Even the cheapest home insurance policy should cover you against the following:

- Civil unrest/riots

- Damage caused by vehicles and aircraft

- Explosions

- Fires

- Hail

- Smoke

- Theft

- Vandalism

- Volcanic eruptions

- Windstorms

We would recommend getting at least an HO-3 Special Risk policy which essentially covers against 16 named perils.  If you want enhanced coverage for your contents, you can upgrade to an HO-7 policy which will provide ALL perils coverage for your contents and covers everything other than  what is specifically excluded in the policy.

What your personal property insurance does not cover

The general rule is that if your homeowners insurance policy does not cover your home against a certain eventuality, the personal property section will also not cover your belongings against that eventuality.

At this point you should familiarize yourself with two terms:

Open peril means the policy will cover you against any damage unless explicitly excluded (HO-7). Two common examples include flooding and earthquakes.

Named peril is much more restrictive. In this case, the personal property insurance will only cover you against perils specifically listed in the policy (HO-3). Vandalism and fire are two common examples.

 It is also important to note that the contents insurance won’t cover you if a fuse shortage or electrical failure destroys your entertainment system or your TV.  For that, you will need a home warranty or equipment breakdown cover.

Deductibles

It is important to know that every policy has a deductible amount. Let us say you claim $10,000 after a fire destroyed a large part of your lounge furniture. If the deductible for this type of claim is $1,000, it means you will pay the $1,000, and the insurance company will pay the rest. The implication is that, if the damage is less than $1,000, you would have to pay the full amount yourself.

Maximum cover

Apart from the maximum amount covered by the policy, there are also sub-minimums. You can’t for example store your life savings under the bed and think the personal property insurance will simply reimburse you if it’s stolen. The same goes for expensive jewelry, clothing such as fur coats, guns, securities, silverware, and more. The insurance company will pay out a certain amount but subject to a maximum. This is typically between $200 (cash) and $2,500 (jewelry).

High-cost individual items must be specifically listed in your personal property insurance policy.  If you have a Patek Philippe watch, a jewelry collection you inherited from British royalty, or photographic equipment that cost more than your home, all of these must be separately scheduled. The premiums will of course be higher, but you will have peace of mind.

The bottom line

While there are many benefits to your standard homeowners insurance policy, it has its limitations. That’s why Individually valuable items should always be specifically scheduled.