Which coverage typically applies to personal property in a homeowners insurance policy?

In a homeowners insurance policy, personal property is typically covered under the actual cash value (ACV) method. This means that when a covered loss occurs, the insurer will reimburse the policyholder for the value of the personal items at the time of loss, which is the item's replacement cost minus depreciation. Depreciation accounts for wear and tear over the years, making ACV a more conservative approach to valuation.

While replacement cost coverage is an alternative that pays for the current cost to replace the lost or damaged item without factoring in depreciation, it is not always the default option in all homeowners policies. Therefore, it's vital to understand that not every policy automatically includes this comprehensive coverage.

Market value, which considers the price at which the property could sell in its current condition, does not typically apply directly to personal property in a homeowners policy. Declared value refers to a stated amount the insurer would pay for a loss, but this may not provide an accurate reflection of actual cash value or replacement costs. Thus, ACV remains the standard approach for the valuation of personal property in homeowners insurance.