What Is Personal Property?

Personal property includes your movable effects and possessions like clothing, appliances, and furniture. A good rule of thumb is that if you intend to take it with you when you leave your home, it is most likely personal property. It is usually not if it is a permanent part of the residence.

Whether you're a homeowner or a renter, you'll usually need insurance to protect these items. Here's what you should know about personal property before you buy a policy, including what qualifies, why it matters, and what kind of coverage you can get for it.

Definition and Examples of Personal Property

Personal property in insurance refers to your tangible, movable possessions, such as clothing, electronics, and furniture. Personal property differs from its counterpart, real property, in that personal property is portable whereas real property is fixed.

Your countertops, for example, are a permanent fixture in your home. They are real property because they are part of the permanent structure. The blender on top of the counter, on the other hand, isn't required. You can move it around or throw it away, making it personal property. The same holds true for larger, non-built-in appliances such as your refrigerator and stove.

Understanding the differences between property types is critical when purchasing homeowners or renters insurance. Both types of policies cover losses resulting from personal property damage in certain incidents. To ensure that your policy's coverage limit is adequate, you'll need to know how much personal property you own.

  • Personal property coverage isn't always limited to the belongings inside your home. Some policies will cover damaged or lost items kept in your car or an off-site storage locker. Others guard stolen property while you are away on vacation or your child is away at college.

How Personal Property Works

Whether you're a homeowner or a renter, you should always have personal property insurance.

To obtain financing, most mortgage lenders require you to obtain a homeowners policy. While they are often more concerned with coverage for the land and building, they will almost certainly require you to obtain personal property coverage as well.

As a condition of the lease, landlords frequently require tenants to purchase renters insurance. A personal property policy is an important component of renters insurance because your landlord's policy will not protect your belongings.

  • Even if your mortgage lender or landlord does not require it, getting insurance for your home and belongings is usually a good idea. Both types of property can be very valuable, and you don't want to have to pay to replace them out of your own pocket.

You are usually only covered for specific types of damage to your personal property. Some of the most common risks are: 

  • Fire and smoke
  • Theft and vandalism
  • Lightning and windstorms

Special form insurance, also known as HO-3.34, is the most common type of homeowners policy. Under this policy, your insurance provider will generally accept claims only for personal property damages caused by incidents specifically mentioned in your contract.

When might you need to appraise your personal belongings? Assume you move into a new apartment and your landlord advises you to obtain renters insurance with a minimum liability coverage of $50,000.

You could use this as an opportunity to obtain personal property insurance. If you estimate your possessions to be around $20,000 in furniture, appliances, clothing, and the like, you might be able to get a policy that both satisfies your landlord and protects your belongings from damage.

What Personal Property Doesn’t Cover

Personal property insurance only covers the risks specified in your policy. The majority of home insurance policies are HO-3 (or "special form") policies. Floods and earthquakes are typically excluded from these policies. That is, if your personal property was damaged as a result of one of these events, your policy will not compensate you.

If you wanted to add coverage for uncovered perils, you'd have to buy a separate endorsement from your insurer (if they offer it) or a separate policy from a different company. FEMA, for example, provides flood insurance through its National Flood Insurance Program to protect property owners, renters, and businesses from flood damage. 

  • If you have valuable personal property, a standard policy may not cover it all. Many policies, for example, exclude coverage for items such as jewelry and watches. Make sure to discuss the issue with your insurance agent if you want coverage for the full value of these types of assets.

Types of Personal Property Coverage

Personal property insurance comes in two varieties: replacement cost and actual cash value (ACV). These policies calculate your claim proceeds in a variety of ways.

Replacement cost policies pay for the cost of replacing the insured property with one of comparable type and quality up to the property's current purchase price. However, allowances for price increases may exist. ACV policies, on the other hand, pay for the property's replacement cost less any depreciation since the purchase date.