Does your homeowners insurance cover all of your valuables and possessions? Are you secure in knowing that you would get paid in full in the case of lost or damaged valuables?
If you're not sure, you could be in for an expensive surprise since many homeowners policies cap or limit the amount of coverage they'll provide for specific high-value or rare items.
Let’s dive into the details about how to appropriately and effectively insure your valuables with your homeowners policy. Note that insuring valuables falls under the contents coverage portion of your homeowners insurance. Learn more about contents coverage here.
Valuables coverage with a standard homeowners policy
What does coverage look like for your valuables with a standard homeowners policy? There are certain coverages and exclusions that a standard policy will encompass in regards to valuable items. Oftentimes, this standard coverage is fairly limited when it comes to coverage for your high-value items. In the next section, we’ll go over what you can do to ensure stronger and more comprehensive protection for your valuables if that’s what you’re looking for.
Most standard homeowners’ policies have low limits for insuring valuables. Typically, a standard policy has a $1,500 limit for jewelry, furs, and electronics and a $2,500 limit for firearms and silverware. This can vary depending on your insurer and dwelling coverage, though.
In most cases, your contents coverage only applies to “named perils.” This means that any hazards that are not explicitly mentioned in the policy are not covered.
For example, most homeowners’ policies don’t include flood insurance. If your television was damaged in a flood, you might not be paid in the case of a flood, even if your television is listed on your contents coverage.
Make sure you’re aware of all “exclusions” as well. For example, a lot of homeowners’ policies won’t cover rare coins or antiques. In these cases, you would need to purchase additional insurance specifically for those items.
Actual cash value
Many homeowners insurance policies cover the "actual cash value" at the time of loss, not the "replacement cost". Actual cash value is the amount the object is worth when making a claim. This makes your payout susceptible to depreciation and inflation.
For example, you pay $500 for a plasma television. After two years, the television is now worth $350. If you filed a claim for covered damage to the TV, you would only be reimbursed $350 for the current value of the television, not the original price you paid for it.
This means you could end up having to buy a television that’s worth less than the original TV, or you would have to pay out of pocket for the difference.
Personal articles endorsement
If you want more coverage for your valuables, you’ll want to purchase a separate endorsement. You can purchase either blanket coverage or an individual floater.
Blanket coverage allows you to raise your coverage on an entire category of items. Categories include jewelry, fine art, silverware, cameras, instruments, fur, stamps, collectables, and even fine wine. For example, if you have a large collection of rare coins, you could purchase blanket coverage that protects all of your coins.
An individual floater or rider covers a specific valuable item. For example, you own a $50,000 painting. The floater could specifically raise your limits for that one piece of artwork.
What are the benefits of purchasing an endorsement policy or blanket coverage for your valuables?
Higher coverage limits
Your homeowners’ policy typically has low limits for coverage. But floaters and blanket coverage offer higher limits for your valuables. With these endorsements, you typically have control over how much you want to set your coverage limits. For example, you own a fur coat worth $3,500. You can set your rider for furs with a limit of at least $3,500 to ensure you would be paid out in full if that coat were lost or damaged.
In most cases, floaters are also not subject to deductibles. That means you don’t have to pay out of pocket first before your insurance kicks in (which is not the case with standard contents coverage).
While your standard policy only covers incidents listed in “named perils,” an endorsement typically covers for a wider array of incidents.
For example, accidents are never covered under your standard homeowners policy. It wouldn’t cover if your son knocked over an expensive vase or you dropped your wedding ring down the sink drain.
But a floater could cover accidents, pet damage, and even “mysterious disappearance.” If you want full and complete protection from anything that could go wrong with your valuables, you want to look into a floater.
Total replacement value
A standard homeowners’ policy will pay out the actual cash value of a lost or damaged item. But if you want to get paid the total replacement value, you have two options.
The first is to pay for “replacement value coverage.” This is a modification to your standard homeowners’ policy, and it typically raises your contents coverage premiums by 10-30%.
The second option is to purchase an endorsement or rider. A rider will allow you to get the original amount you paid for the item by specifying the “receipt cost” for the item.
How to make the most of your policy
What do you need to do to ensure your homerowners' contents coverage is as helpful as possible when it comes to your valuable items? This list can help.
1. Know your named perils and listed exclusions on your homeowners policy. What is and isn’t covered?
2. Determine if your contents coverage limits are high enough and include items of high-value to potentially replace all of your valuables in the case of a covered loss.
3. Purchase a rider or floater if you have high value or high-risk items. You also want an endorsement if you want higher limits, broader incident coverage, and total replacement value.
4. Update your contents inventory frequently. Some items will increase in value, so you want to make sure they are fully protected. Some items will decrease in value, so you could reduce your premiums. Make sure you always add new valuables to your list immediately after purchasing or receiving, including your holiday gifts. Write down serial numbers and save all receipts to document original price value.
This roundup of the best home inventory apps can help you easily create and update your inventory.
5. Have an appraiser document the value of your items, especially if over $50,000. Give a copy to your insurer to avoid any concerns in the case of a loss.
6. Consider a separate policy. Some categories, like jewelry, actually offer separate insurance policies specifically for that type of valuable. These policies are completely detached from your homeowners insurance.
So, if you made a claim with your jewelry protection insurance, it wouldn’t be a “ding” against your homeowners insurance. This means it wouldn’t raise your homeowners premiums. This can be useful if you have a lot of items in a category or those items are particularly at risk for some reason. You want to avoid making a lot of claims against your homeowners policy, so you don’t raise rates drastically.
Your standard homeowners insurance may not always be enough to completely cover your valuables and possessions. Endorsements or riders for your valuables are a great way to raise your coverage limits, avoid deductibles, and protect against a wider array of potential hazards.
Not sure if you have the right insurance for your valuables?