The typical homeowners policy offers plenty of coverage for personal property, usually offering a limit equal to half of the amount reserved for the residence (ex. your home is covered for $150,000, so your contents and furnishings are covered for $75,000). While this is generous coverage, it doesn’t extend to all types of property for all causes of loss. Certain types of property, because of its high value and liquidity, is far more vulnerable to loss either easily destroyed, easily stolen or both. For instance, an insurer protects your sofa right along with your fur coat for the same basic premium, but the two types of property don’t represent the same chance of loss. Recognizing this fact, insurers put more restrictions on the coverage provided by a basic policy.
Theft Coverage Limitations
When property is lost due to theft, coverage under a standard homeowner policy is severely limited (generally between $1,000–$2,500) for the following types of property:
- Jewelry, watches, furs, and gemstones
- Dinnerware, serving sets, trophies, and similar property made of or plated with silver, gold, platinum, or pewter
- Firearms, accessories, and related property
Other Coverage Limitations
Several categories of property are subject to very modest limits (generally between $200–$2,500) of coverage, regardless of the cause of loss (theft, fire, accidental breakage, etc). Specifically:
- Money, bank notes, coins, medals, gold, silver, and platinum (other than jewelry or dinnerware)
- Securities, accounts, deeds, tickets, stamps, manuscripts, passports, and similar property
- Watercraft and related property including their trailers
- Trailers not used with watercraft
- Business property located in your residence
- Business property located away from your residence
- Certain types of electronic property (CD players, VCRs, TVs, radios, computers, and related accessories) which is lost or damaged while in a car or is located away from your home and used for business
Remind me about homeowners limitations
The typical homeowners or renters policy contains substantial coverage limitations for certain types of property. The modest insurance protection affects property that is highly vulnerable to loss because it is targeted for theft and/or has a high level of value in relation to its size. Examples are gold, money/securities, precious metal-plated dinnerware, jewelry, furs, stamps, electronic property, business property, watercraft, and firearms.
How do you handle the limited coverage situation? You have to do something extra to your insurance program. Insurance companies are happy to provide more coverage, if they are paid for their trouble. Specifically, limited coverage can be handled using the following methods:
- Increased Coverage C Endorsement—This form is only appropriate for property saddled with limited coverage for theft losses. This form is attached to a basic policy, and it increases the theft insurance limit (i.e., for jewelry from $1,500 to $5,000).
- Scheduled Personal Property Endorsement—This form is used for increasing coverage for property that has protection reduced for all sources of loss. The property is removed from the basic policy’s limits and is covered exclusively by the endorsement. This form takes more work since each item of property has to be listed and assigned a particular insurance limit.
- Inland Marine Property Floater—This method works like the personal property endorsement, except that it is a separate policy. This alternative is more appropriate for persons owning substantial amounts of high-valued property. The coverage must often be purchased from specialized insurers and comes at a high cost. In order to qualify for such coverage, you may need to meet special circumstances such as having a residential alarm system or make using of vault storage.
Another advantage of special handling – In order to arrange coverage under a schedule or an inland marine policy, the property must be properly valued. This often involves appraising the property. It’s very helpful to have an expert source establish the current value of jewelry, furs or other valuable possessions. In fact, such property should be appraised every two or three years since their values often increase over time.