What Is Personal Property?

What Is Personal Property?

Let me explain personal property to you directly: it's all the assets you own that aren't real estate, and they're movable, like your furniture, electronics, and even digital assets. Unlike real estate, which is fixed in place, personal property isn't tied to a location, and that difference impacts how it's taxed and insured. You should know it plays a big part in your homeowner's insurance and how lenders value it for loans.

Key Takeaways

Personal property covers movable assets such as furniture, electronics, and clothing, setting it apart from real estate. In homeowners insurance, it often gets coverage at 50% to 70% of your dwelling's value. You can insure it based on replacement value or its depreciated actual cash value. Tangible personal property includes physical items like vehicles and furniture, while intangible covers digital assets and intellectual property. I recommend creating an inventory of your belongings to make claims easier if something happens.

A Deeper Dive Into Personal Property

You might hear personal property called movable property, movables, or chattels. As an asset, lenders consider it when you're applying for a mortgage or other loans. You can insure it by its current value with depreciation or by what it would cost to replace with a new item. Items like appliances, clothing, and cars typically depreciate over time, but artworks and antiques often gain value. Lenders look at the current value of your personal and real property to assess your creditworthiness.

Personal property breaks down into tangible and intangible types. Tangible examples are vehicles, furniture, boats, and collectibles. Intangible includes digital assets, patents, and intellectual property. Just like mortgages are secured by real property such as a house, some loans use personal property as collateral—think car loans where the vehicle backs the loan.

How Personal Property Affects Your Insurance Coverage

Personal property is central to home insurance. Your homeowners policy usually covers both the dwelling itself and your personal property, often called the home's contents. You need to make a list of your belongings to prepare for any issues.

Insurance Coverage Details

Most policies set the value of your personal property as a percentage of the dwelling's value, usually 50% to 70%. For instance, if rebuilding your home costs $200,000 after a fire, the policy might cover $140,000 for personal property at 70%.

You have choices between replacement value or actual cash value for coverage. With replacement value, the insurer replaces a destroyed item with a similar new one. Actual cash value pays the depreciated amount, reflecting age, so you get less than replacement cost. You could add a recoverable depreciation clause to get both depreciated and replacement values.

Take a 10-year-old refrigerator destroyed in a fire: replacement coverage gives you enough for a new one, but actual cash value gives the estimated value of the old one.

Important Factors to Consider for Personal Property Insurance

If your property is destroyed, you'll file a claim describing losses, so keep an inventory with photos and receipts stored safely off-site. Policies often limit coverage for items like jewelry and computers—say, $1,500 for jewelry. If yours is worth more, pay extra to raise limits or get a floater for full value.

What Are Examples of Personal Belongings?

Personal belongings under homeowners insurance can include furniture, appliances, dishes, rugs, electronics, lamps, curtains, jewelry, clothing, tools, and outdoor equipment.

What Is the Difference Between Personal Property Insurance and Personal Liability Insurance?

Personal property insurance pays you for covered belongings if they're lost or damaged. Personal liability insurance covers you if you're liable for harming someone on your property.

What's the Difference Between Replacement Cost and Actual Cash Value?

Replacement cost means your policy pays to replace the item at current market value. Actual cash value pays the depreciated value, accounting for age.

The Bottom Line

Personal property includes tangible items like furniture and appliances, plus intangible assets such as digital assets and intellectual property. You must understand your homeowners insurance, which covers personal property based on a percentage of your dwelling's value. To get the most from your policy, keep a detailed inventory with photos and receipts stored securely—this will help you handle claims and get proper compensation.