How Much Personal Property Coverage Do I Need?

For personal property insurance, you need to have enough coverage to restore a major loss to all of your possessions. At the very least, you need to protect enough personal items that you don’t wish to restore out of your own pockets following a major loss, such as a fire.

While some agents use software to calculate replacement costs based on national averages and your home or apartment's rooms, this may not consider high-value items like jewelry or artwork.

Some items have sub-limits, meaning additional coverages should be discussed with your agent. You, as the applicant, must provide item values, possibly requiring appraisals, and ensure proper insurance through scheduling or a personal articles floater.

Your agent will assist in choosing an endorsement and determining the associated premium, noting that the property is insured at "stated value," not replacement cost, with a typically lower deductible than the regular policy deductible.

Let’s explore the different types of reimbursements below as well as floaters that can help you stay better protected:

Replacement Value Vs. Actual Cash Value (ACV)

The decision on whether to base your personal property coverage on replacement cost or actual cash value is always made at the time of application.

The decision on whether to base your personal property coverage on replacement cost or actual cash value is always made at the time of application. If you prefer to have claims resolved in a way that allows you to replace your contents on a new-for-old basis, then replacement cost should be your choice.

If you are not as concerned about your contents, and only expect the cash value for them at the time of a loss (depreciated value), then you should choose actual cash value coverage and save a little money on your insurance premium.

If you prefer to have claims resolved in a way that allows you to replace your contents on a new-for-old basis, then replacement cost should be your choice.

Named-Risk Coverage vs. All-Risk Coverage

Depending on the type of home insurance policy you choose, your personal property will be insured for named perils (named-risk) or all perils (all-risk). A typical homeowners policy is written on a special policy form, called an HO-3 form, which provides contents insurance coverage on a named-risk basis.

This means that 16 perils are covered. Many agents offer an HO-8 form, which is typically designed for newer homes that are protected by alarm systems and located in gated communities. This type of policy insures your contents on an all-risk basis.

This means that your property is covered for every peril unless it is excluded in the policy. The exclusions are usually applied because another type of policy, such as flood or earthquake, provides coverage for the excluded peril.