Personal Property

Personal Property

What is personal property?

Personal property is a category of property that can include anything other than real estate. The distinguishing factor between personal property and real estate, or real estate, is that personal property is movable; that is, it is not permanently attached to a particular location. It is generally not taxed as a building.

Understanding personal property

Personal property is also called personal property, furniture and movable property. Because it is considered an asset, it can be considered by a lender when someone applies for a mortgage or other loan.

Personal property can be insured for its current value, possibly depreciated, or for what it would cost to replace it with a new similar item.

Certain types of goods, such as household appliances, clothing and automobiles, tend to depreciate over time. Other types, such as works of art and antiques, will sometimes appreciate their value. When assessing the creditworthiness of a potential borrower, lenders can consider the total present value of their personal property added to their real estate.

Key points to remember

  • Loans can be secured by personal property (works of art or automobile) or real estate (house).
  • Personal property plays a role when people provide housing.
  • A common example is a car loan, for which the car itself is used as collateral.

What is real estate or personal property? Real estate, such as land or most types of buildings, is not mobile. Examples of tangible personal property include vehicles, furniture, boats and collectibles. Personal property can be intangible, as in the case of stocks and bonds.

Just as some loans – mortgages, for example – are secured by real estate, such as a house, some loans are secured by personal property.

Example of personal property and insurance

Personal property also comes into play when people provide housing. A homeowner’s insurance policy generally covers not only the physical home, but also the owner’s personal property, often called the “contents” of the home.

Most home insurance policies base the value of the personal property of the policyholder on a percentage of the value of the home, usually 50% to 70%. For example, if a house would cost $ 200,000 to rebuild if it burned down, the police could use 70% of that figure, or $ 140,000, as the limit of coverage for the owner’s personal property.

Home insurance policyholders can generally choose between two options to cover their personal property: replacement value or actual cash value. If the policy provides for a replacement value, the insurer would be obliged to replace a destroyed item with a new similar item. With an actual cash value, the insurer would only have to pay what the item was worth after taking depreciation into account.

So, for example, if a refrigerator was destroyed in a fire, a homeowner with a 10-year refrigerator and a replacement cover should receive enough money to buy a new refrigerator, while an owner with a actual costs would receive regardless of insurance. The company has determined that a used 10-year refrigerator is worth it.

Special considerations

In the event that their personal property is destroyed, policyholders must file a claim with their insurance company, describing what they have lost. For this reason, homeowners are well advised to take inventory of their personal property, ideally with photos and receipts, and store it safely off the premises, just in case it becomes necessary.

Homeowners’ policies also limit coverage of certain types of personal property, such as jewelry and computers. For example, a policy may limit their jewelry coverage to $ 1,500. Policyholders whose jewelry is worth more than that can pay extra to increase their policy limits or buy additional insurance, often called a float, to cover its full value.

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