Insurance for Personal Property is important, but often overlooked. What's included in personal property? It's what you put in the moving truck, or what would fall out of the home if you could pick it up and turn it upside down. Your clothes, furniture, electronics, toys, some appliances, and all the stuff in your garage. So how do you cover it? You will be asked to figure out what your stuff is worth. This can be a tough exercise. Let's be real, it's difficult to even keep track of what stuff you have. Lots of questions; few answers. So let's get to some answers:
First off let's start with taking inventory. We recommend taking a look at KnowYourStuff.org its a great website from the Insurance Information Institute, and they have several tools and an app and lots of information that can help you figure out what stuff you have, and what should be insured.
From there you can determine the value of your stuff and what it would take to replace it in the event of a claim, like a fire. Typically insurance companies will include a percentage of the value of the home for your personal property. In some cases its 70%, 50% or for others its 40%, but these are just rules of thumb, and more coverage can be purchased, but you have to have some idea of how much coverage you need.
There are two ways that personal property can be covered.
1. Replacement Cost - As always the replacement cost option is always the best option. In the event of a claim it replaces what was damaged with like kind and quality. Meaning you would be able to replace what was damaged with a new version. It does not account for depreciation.
2. Actual Cash Value - What is the value of your TV you purchased 5 years ago today? What's the value of the shirt you're wearing, if its the most comfortable you own, probably not much. In an actual cash value loss settlement situation, that's the question that comes to mind. Take what it cost new and depreciate it to figure out what it is worth today, and that is what the insurance company pays. That often means you are getting pennies on the dollar for your stuff. Not great for sure, but it is what is the cheapest, and most common way for people to insure personal property.
Typically you have a choice between Replacement Cost and Actual Cash Value for your personal property. This is a choice you should make based on your personal property and how important it is to you.
A few other cool things about insurance for personal property.