Do Homeowners Policies Limit Coverage on Your Valuables?

Not sure if your homeowners insurance policy limits coverage on your valuables? You might be in for a shock when you file an insurance claim for losses caused by a covered event!

Valuables include high-value or rare items, such as jewelry, watches, and silverware. They are personal property items falling under “Coverage C – Personal Property” in a standard HO-3 policy with “special limits of liability.”

Read on to learn what home insurance coverage limits might apply to your valuables and how to ensure you are not out of pocket after a covered event.

A standard homeowners insurance policy covers personal property losses typically up to 50% of your home or dwelling limit. So if you have $1 million coverage on your home, you typically have $500,000 personal property coverage.

Based on the above, many homeowners might feel they have sufficient coverage for personal property, including valuable items. Unfortunately, this is often not the case.

For example, you may have a total personal property coverage of $500,000 but a special limit of only $1,500 for theft of jewelry. If someone steals $10,000 worth of jewelry from your home, your insurer will only pay you up to $1,500 minus your deductible. That leaves you with an $8,500+ loss!

Note: A standard homeowners insurance policy doesn’t only cover personal property in your home but anywhere in the world. However, your insurer’s liability is typically limited to 10% or $1,000 (whichever is greater) of the limit of liability for personal property that applies to your home or dwelling.

Special Limits of Liability

A standard HO-3 homeowners insurance policy includes a “special limits of liability” (or similar wording) section under personal property coverage.

Special limits of liability per category might include:

• $200 for money, banknotes, gold, silver, and coins
• $1,500 for securities, deeds, personal records, letters of credit, and passports, including the cost to research, replace, or restore the information
• $1,500 on watercraft of all types
• $1,500 on trailers or semi trailers
• $1,500 for loss by theft of jewelry, watches, furs, precious and semiprecious stones
• $2,500 for loss by theft of firearms
• $2,500 for loss by theft of silverware and silver-plated ware

Refer to your homeowners insurance policy for the limits that apply to you as they might be different from the above ones.

Actual Cash Value (ACV) vs Replacement Cost Value (RCV)

Besides your total personal property coverage and special limits of liability, there is one more thing you need to consider. Do you have actual cash value or replacement cost value coverage?

A standard HO-3 policy will typically only cover the actual cash value of your personal property. It usually includes the following (or similar wording) under “Loss Settlement” in Section I – Conditions:

“Covered property losses are settled as follows:

Personal property – at actual cash value at the time of loss but not more than the amount required to repair or replace.”

Actual cash value – covers the replacement cost of property minus deductions for depreciation or wear and tear. So your property is insured for its depreciated value.

Replacement cost value – covers the replacement cost of property without subtracting anything for depreciation or wear and tear. So your property is insured based on its replacement value.

You will usually receive two checks if you have replacement cost value coverage, as follows:

Check 1 is for the actual cash value of your item.

Check 2 is for recoverable depreciation. You will usually only receive your second check once you buy the item you’re replacing. Your insurer will normally require you to send them proof of the actual amount you paid.

Depreciation is the difference between the replacement cost and the actual cash value of an item.

Note that even if you have replacement cost value coverage, special limits of liability still apply.

The challenge, if you have actual cash value coverage, is that valuables such as jewelry don’t necessarily depreciate the same way a laptop or television does.

The best way to ensure you have sufficient coverage for your valuables is to increase your coverage.

How to Increase Your Insurance Coverage for Valuables

There are two ways you can increase your insurance coverage for valuables, namely:

Blanket Coverage Endorsement or Rider

Blanket coverage allows you to raise your coverage on an entire category of items, such as jewelry, art, and rare coins. However, the coverage is still limited for both individual items and overall losses.

For example, you may raise the coverage for jewelry to $2,000 per item with an overall limit of $6,000. But, it might not be sufficient to cover individual high-value items.

An Individual Floater

A floater is a policy change that schedules and increases coverage for a specific item, such as a jewelry floater for a diamond engagement ring. And if you own a $100,000 painting, you should also get a floater for it.

Note that before buying an individual floater, the item has to be professionally appraised.

That’s a Wrap

We trust this article has given you a good understanding of how homeowners policies limit coverage on your valuables. And, more importantly, what you can do to ensure you have sufficient coverage on your personal property.

Managing a homeowners insurance claim is often not a walk in the park. It can get complicated very quickly. Understanding your coverage limits and ensuring you have the right coverage is the first step.

However, that doesn’t necessarily mean the claims process is easy or that if you file a claim for a covered event, you’ll receive a fair settlement offer.

If you have a large or complex insurance claim, we suggest hiring a public adjuster.

A licensed public adjuster can help you overcome the challenges of managing your homeowners insurance claim. And they can assist you in getting the best possible settlement offer you’re entitled to.

Avner Gat, Inc. has 17+ years of experience as a public adjuster in Los Angeles, covering Southern California. We protect homeowners from the games and fine print that insurance companies are known for.

Call us at (818) 917-5256 to find out how we can assist you.