Unpacking Your Homeowners Policy: Part 2 – Coverage C: Personal Property
When people think about home insurance, they often focus on the structure—the walls, the roof, and the foundation. But what about everything inside your home?
That’s where Coverage C: Personal Property Coverage comes in. This part of your policy helps protect your belongings—if they’re damaged or lost due to a covered peril like fire, theft, or certain types of weather-related events.
However, there are important details to be aware of, such as coverage limits and exclusions that could impact how much you’re reimbursed after a loss. Some policies may have limitations on high-value items, such as jewelry or collectibles, which might require additional coverage.
Because insurance policies can be complex, personal property coverage isn’t always discussed in depth when a policy is set up. That’s why reviewing your coverage regularly can help ensure that your belongings are adequately protected.
In this installment of Unpacking Your Homeowners Policy, we’ll take a closer look at Coverage C, how it works, and what homeowners should consider in order to avoid surprises when filing a claim.
What Exactly Is Personal Property Coverage?
A simple way to visualize Coverage C: Personal Property Coverage is to imagine lifting your house, removing the roof, flipping it upside down, and giving it a shake. Everything that would fall out—furniture, clothing, electronics, appliances, and jewelry—is considered personal property under your homeowners insurance policy. Your personal property limit isn’t based on what you own. Instead, it’s typically a percentage of your dwelling coverage.
However, the amount of coverage you have isn’t based on the actual value of your belongings. Instead, most policies determine your personal property limit as a percentage of your dwelling coverage (Coverage A)—often ranging from 50% to 80% of your home’s insured value.
The traditional industry benchmark for personal property coverage was set at 70% of the dwelling amount. While this may have worked in the past, it doesn’t always make sense today—particularly for high-value homes, where personal property needs can vary significantly.
Some insurers tout that their policies align with ISO Policy Standard Forms, making it sound as if they’re providing a gold-standard policy. However, the Insurance Services Office (ISO) originally designed these standardized forms decades ago to help insurers maintain consistency—not to dictate what’s best for individual homeowners.
But the insurance landscape has evolved and so have client’s needs. Relying on an outdated formula that locks you into a 70% derivative of your dwelling coverage for personal property—without flexibility—can leave homeowners underinsured or overpaying for coverage they don’t need. Choosing an insurance provider that adapts coverage to fit your specific situation, rather than following outdated industry norms, is critical to ensuring your assets are truly protected.
The good news? You can and should adjust your personal property limit to match what you own.
The Settlement Trap: Actual Cash Value vs. Replacement Cost
Your personal property isn’t just insured for a dollar amount—how it gets paid out after a loss matters just as much. Here’s the big question:
- Does your policy pay you for a brand-new replacement? Or…
- Does it give you the depreciated value of what you lost?
This is the difference between Replacement Cost Value (RCV) and Actual Cash Value (ACV).
You should think of Replacement Cost Value (RCV) as your insurance company giving you enough money to buy new items of similar quality when a covered loss occurs.
Conversely, Actual Cash Value (ACV) factors in depreciation. Meaning your insurance company may only pay you 20-30 cents on the dollar for your personal property when a covered loss occurs, leaving you to pay the rest out of pocket.
For a single item, this might not seem like a big deal. But imagine a total loss scenario—where every single item in your home needs to be replaced.
Understanding Personal Property Coverage in Illinois
In Illinois, the homeowners insurance market is highly competitive, with many different coverage options available. However, the largest insurer in the state, holding approximately 21.5% of the market (at the time of writing), does not offer Replacement Cost Value (RCV) for Coverage C: Personal Property Coverage.
Unlike a standard Replacement Cost policy, which reimburses you for the cost of replacing lost or damaged items with new ones of similar kind and quality, B1 Partial Replacement Cost Coverage leaves the settlement amount open to interpretation by the claims adjuster. Without clear definitions in the policy, it can be difficult to predict how much reimbursement a homeowner will actually receive in the event of a claim.
For homeowners in Illinois, this highlights the importance of understanding how personal property is covered and exploring options that provide full transparency and adequate protection for their belongings.
What You Need to Do Right Now
Most people assume their personal property is fully covered—but assumptions don’t pay for new furniture when your house burns down.
Check your policy today and ask these key questions:
- What percentage of my dwelling amount is my personal property insured for?
- Is my personal property covered at Replacement Cost or Actual Cash Value?
- Does my insurer have a vague settlement language like B1 Partial Replacement Cost?
- Am I at risk of getting short-changed in the event of a total loss?
Because when disaster strikes, you don’t want to be left paying out of pocket for everything you already thought was covered.