How Does Compensation Work for Personal Belongings Insurance?

Under your home insurance policy, your items may be covered by personal belongings coverage. Whereas dwelling coverage covers the physical home and its attached structures, personal belongings coverage provides compensation for items within the home and even in your vehicle.

What Does Personal Belongings Insurance Cover? 

Personal belongings coverage provides compensation if your personal belongings are damaged or destroyed due to fire, wind, hail, lightning, smoke, theft, vandalism and more. Limited water damage may be covered, but flood damage and earthquake damage are generally excluded. 

Personal belongings coverage generally covers all of your personal items except a few exceptions. Paper money and important documents, for example, are usually not covered under personal belongings coverage. Other expensive items may have limited coverage under home insurance. Belongings such as jewelry, art, furs and electronics may need additional coverage called policy floaters.

How Much Do You Get Paid for a Personal Belongings Claim? 

The amount you receive after filing a home insurance claim depends on the policy and the amount you had insured.

There are two main types of policies when it comes to personal belongings compensation: actual cash value and replacement cost value.

Actual cash value policies provide compensation for your lost or damaged items after accounting for depreciation. This means that as the value of your items goes down over time, so does the amount of compensation you can receive. For example, say the value of your computer drops over the years from $1,000 to $500. When you file a claim for your computer after damage or theft, you will likely receive closer to $500 in compensation.

Replacement cost value policies provide compensation for your lost or damaged items without accounting for depreciation. No matter how much the value of your items goes down over time, you will receive compensation to replace your item with one of similar or identical make and value. This type of policy is generally more expensive, but it is also more likely to allow you to replace your items fully.

How Do You File a Home Insurance Claim? 

If your items are damaged, you will have to call your insurance agent. They will send an underwriter from the company to investigate the claim and calculate how much compensation you will receive based on the damages and your policy. Once a policy is approved, you may receive a single lump sum payment for compensation.