How do limitations work in my personal property coverage?
Homeowners’ policies and renter’s policies include a specific coverage for your personal belongings, called Coverage C. In a normal homeowners policy, this portion of your policy provides broad coverage for common household items and limited coverage for more valuable high-risk items.
What are high-risk items, and why are they limited on my policy?
Expensive items such as jewelry, guns, artwork, and coins tend to be higher-risk items. They are limited on the average policy because they are more prone to theft, and when accidents occur that damage these items, the claims are more expensive.
So how do limitations on property work in practice?
The limitations on property dictate the maximum amount that will be paid out for particular types of property, per loss. For example, your basic homeowners policy probably includes a $1000 limit for jewelry losses. If a thief breaks into your house and steals your entire jewelry box, the maximum you will receive under this provision is $1000, even if the items stolen were worth much more.
Setting limits on my most treasured possessions seems so unfair—can you explain why the insurance companies do this?
These limits may seem unfair to some, but they keeps insurance premiums low for the average homeowner. That way, those of us who don’t have chests of silver don’t end up subsidizing the expensive losses of those with lots of high-risk personal property. And policyholders who do have high-risk items in their homes can have the extra coverage they need by increasing the limitations on specific property types, in exchange for a modest increase in premium. That way, everyone assumes the appropriate cost of risk depending on the likely cost of a claim if his or her items are stolen or damaged.
So, I do own some high-risk items. What can I do to ensure I have proper coverage for those items under my homeowner’s policy?
If you own valuable items such as furs, jewelry, silver, guns, art works, coins, gold bullion, or other collectables, there are several things you can do to increase your coverage for these items. The most important thing to do is to talk to your agent about your personal possessions, and discuss your unique needs. Your agent can help you decide what method for increasing coverage will work best for you. One option is to increase the coverage limits for the particular types of property you own (such as raising your jewelry limit to $4,000 or $8,000, depending on your needs). Another option is to schedule (specifically list) your high-value items on your homeowners’ policy. You will need to provide an appraisal of the value of each item, and pay a small additional premium for each item. Or you can have an additional floater policy separate from your homeowner’s policy to insure your high-risk items. Talk to your agent about your individual insurance needs—there is no substitute for professional advice tailored to your needs!