Homeowners Insurance and Limits on Coverage of Valuables

A home is usually an individual’s largest investment, so most people have taken the precaution of acquiring adequate insurance coverage on their home. However, many also keep their most valuable possessions in their homes. While most homeowners insurance policies (“HO policies”) cover valuable possessions, such as jewelry and collectibles, coverage is often limited for such items. Standard HO policies may cover only a total of $1,000 for lost or damaged valuables and may have coverage limits of only $200 per “category” of such items. The limited coverage for such items may have been designed to encourage the purchase of additional coverage. However, in any event, prudent consumers should consider purchasing additional coverage.

Types of Homeowners Policies
Homeowners insurance policies are available to consumers whether an individual owns a home, condo, or rents. Different policies address different circumstances and are labeled numerically. Residence, or home, policies are labeled HO-1, HO-2, or HO-3 policies (coverage increases numerically). Condo policies are labeled HO-6 policies and renter policies are labeled HO-4. In general, minimal HO insurance covers the structure itself, furniture, some personal property and the main contents of the dwelling, attached structures (e.g., a garage), and property damage. However, regardless of the “level” or “type” of policy, there are a significant number of personal items within the home that are usually excluded from coverage and which are collectively termed “valuables” or “high-value items.”

Valuables That May Have Limited Coverage:

  • Cash
  • Cameras and camera equipment
  • Valuable papers and securities
  • Boats and trailers
  • Business-use property (home office including PCs and other equipment)
  • Silverware
  • Firearms
  • Jewelry, watches, furs, and related items
  • Artworks, collectibles, and antiques

Additional Coverage for Valuables
Additional coverage for the items listed above is available. Given the limited coverage that most basic HO policies offer for such valuables, individuals are well advised to purchase special additional coverage, either in the form of an “endorsement,” or as a “floater.”

An “endorsement,” (sometimes referred to as a policy “rider”), is an addition to a current HO policy which allows the insured to raise the limit on any one “category” of items. For example, the additional $25 cost of an endorsement could raise the total coverage for “jewelry” by $1,000. However, endorsement coverage is limited to the risks, or causes of loss, included in the general HO policy.

A “floater” is an entirely separate policy which can be purchased to cover particular valuables on an itemized basis. Floaters are not subject to the same HO policy limitations as endorsements and can be drafted to cover the cost of any valuable and against all risks. Purchasing a floater is encouraged for very expensive valuables.

A Proper Inventory May Ensure Adequate Coverage
A personal inventory of all personal items, including valuables, is important to ensure that the true value of property is adequately covered. Coverage should be checked, and increased periodically (approximately every three years), especially when major new purchases are contemplated.

Policyholders are urged to document personal property covered by:

  • Making a comprehensive inventory of the personal property
  • Taking photographs and/or a video of the property
  • Getting an appraisal for especially valuable items (required for purchase of a floater)
  • Recording details such as serial numbers, identifying marks, and coin dates
  • Keeping receipts for major items (required for purchase of a floater)

Upon completion, it is important to store the recorded inventory somewhere outside the home to avoid loss of the inventory itself.

While most HO policies do not provide any coverage for cars, aircraft, or pets, additional coverage for the above-mentioned valuables is available. As with any contract, it is important for the consumer to carefully review the specific terms, conditions, and coverage of personal HO policies and ask questions before purchasing, in order to maximize the available protection while keeping the cost of such insurance at a reasonable amount.