What Does Personal Belongings Coverage in Home Insurance Cover?

Home insurance policies have many sides of coverage, one of which is personal belongings. This type of coverage provides compensation for your personal belongings if they are lost or damaged due to a covered incident.

Covered Dangers

Also known as perils, there are certain dangers that are covered under personal belongings coverage. The average home insurance policy will provide compensation if your personal belongings are lost or damaged due to: 

A basic home insurance policy won’t cover everything. For some dangers, you may need additional coverage. Most home insurance policies exclude items that are lost or damaged due to earthquakes or floods.

Home insurance also will not cover damage caused by negligence or normal wear and tear. For example, if a homeowner fails to maintain their sewer pipes and one bursts, leading to water damage for a range of belongings, those belongings will not be covered under home insurance.

Items Covered Under Personal Belongings Coverage

Personal belongings coverage covers most items, such as clothes, toys, electronics, purses, etc. Some expensive items have limited coverage under a basic policy, however, and may need to be covered under an additional policy floater. Items that may have limited coverage under a home insurance policy are furs, art and jewelry.

This coverage also does not include important documents or paper money.

Types of Compensation for Personal Belongings

There are two types of home insurance policies when it comes to compensation: actual cash value and replacement cost value.

Actual cash value policies provide compensation for lost or damaged items while accounting for depreciation. This means that as the cash value of your personal belongings drops, so does the amount of compensation you can receive. For example, say you purchase a laptop at $1,000. A couple years later, someone breaks in and steals it. The cash value of the computer has since dropped to $500 from the time you bought it, so you will only receive $500 from a claim.

Replacement cost value policies do not account for depreciation. Instead, they provide compensation for items of equal or similar value. These policies are generally more expensive, but they are more likely to allow you to replace your item completely after an incident.