We all have personal property and want to protect it in case of loss. But many people don’t understand how it’s covered by their homeowners insurance policy or how their deductible impacts what they’ll pay when a claim happens. A deductible on a homeowners or renters policy is important as it helps policyholders cover losses more affordably. Here’s how both deductibles and personal property protection work together.
The deductible on an insurance policy is the sum of money a policyholder must pay before the insurance company covers a loss from a claim. Whether you reside in a home or condo you own or a rent, your insurance policy has a deductible. The deductible amount is based on protections set by the insurance company and may be as low as $250 or as high as $10,000. Generally, the higher the deductible, the lower the premium, because the policyholder agrees to be responsible for a larger portion of a covered loss.
Insurance companies typically charge deductibles as either a flat or fixed amount. They may also charge based on a percentage of the home’s replacement value under the Coverage A limit listed on a policy’s declaration page.
The deductible listed in your homeowners or renters policy is your responsibility when there’s a covered loss. The deductible appears as a deduction subtracted from the total amount the insurance company agreed to pay.
For example:
A deductible is paid upfront before the insurance company pays the balance of the claim. If damages are less than the deductible, the insurance company isn’t required to pay out for the loss, since the deductible amount covers the bill.
Personal property protection is another key piece of your homeowners insurance. Personal property includes furniture, electronics, clothing, and other things inside your home that can be moved around. The limit of coverage depends on your insurance carrier. Some companies take a percentage of your home limit, commonly 50%, 60%, or 70%, and designate that for personal property. Other companies include personal property in a blanket limit calculated based on your home value.
Coverage for personal property on an unendorsed policy is typically on a named peril basis, which means the perils that are covered are listed in the policy. A peril is a specific event or circumstance that causes a loss, like a fire or theft. Some insurance companies pay losses based on actual cash value, which often calculated as replacement cost minus depreciation. These policies can be endorsed to provide replacement cost coverage, which pays the cost to replace property, without deduction for depreciation.
All losses to personal property are subject to the deductible.
You can also add an endorsement that broadens coverage from named perils to risks of direct physical loss. This coverage extends protection to include all causes of loss except those specifically excluded. For example, accidental damage to a television caused by a thrown video‑game controller is not a named peril and would be covered only under the broadened coverage for direct physical loss.
Some types of property, such as jewelry, silverware, and firearms, may be subject to special limits of liability in the homeowners policy.
Another way to cover personal property is to specifically schedule higher-value items. Common examples include jewelry, furs, firearms, and fine arts.
When items are scheduled:
Some insurance policies offer an optional wind/hail deductible that applies only to wind/hail claims. The deductible amount is generally higher than the standard homeowners’ policy but provides savings on premium rates. As with all deductibles, the higher the deductible, the lower the premium, because the policyholder is responsible for a larger portion of the covered loss.
Endorsements added for additional protections, such as protection for a finished basement in the event of sump pump failure or water backup, may also include separate deductible options equal to or higher than the primary deductible.
A deductible is charged for every claim submitted, and if multiple claims occur during a policy term, the policyholder must pay the deductible amount owed for each separate claim.
Deductibles and personal property coverage work together to protect you and your belongings. Understanding how your deductible applies, how personal property is covered, and the options available to broaden and schedule coverage helps you to be prepared if a loss occurs.
This article is intended for general educational and illustrative purposes only and should not be construed to communicate legal or professional advice. Further, this article is not an offer to sell insurance. Please consult with your licensed insurance agent for specific coverage details and your insurance eligibility. All policies are subject to the terms, conditions, limitations, definitions, and exclusions contained therein.