Often when we have a new claims representative handling property losses, the first claims they receive are what I call “starter” claims. These are relatively simple homeowners claims involving personal property (also known as “contents”). The reason I start with these is twofold: there are plenty of these types of losses coming in, and even though they are not complicated, they give the representative a steady flow of claims that involve items subject to “Special Limits.”
Homeowner’s policies are designed to cover the needs of the average homeowner. This means the insurance company expects certain types of items to exist at the covered property. There is coverage for the house and other structures (outbuildings, fences, mailboxes, etc.) on the premises, then there are “contents” items normal to the occupancy of the home which also need to be covered. The policy usually bases the amount of coverage for these contents upon the coverage amount for the home. It assumes that a larger house will have more contents, or a custom home will have custom furnishings and perhaps upgraded appliances. However, there’s a potential flaw in that reasoning, so the policy goes a step further by limiting coverage for certain types of property so everyone ends up with the same basic coverage. Examples of the type of property that is subject to this “Special Limits” coverage includes money, jewelry and watches, precious metals, furs, guns, and property used for business purposes. Some of these items are only limited when a theft occurs, others are limited for any cause of loss.
So back to my new claims representative. He (or she) is learning something that many policyholders may not be aware of: they do not have sufficient coverage for these types of property. Many of the items subject to the “Special Limits” are also prime targets for theft. Cash, jewelry, and silver flatware are small and easily thrown into pillowcases and hauled out of homes, but most policies limit coverage for theft losses for these items. Given the recent rise in precious metal prices, items purchased ten years ago might have much greater value today. Another area where basic coverage might be lacking is when lightning damages items used for business such as computers and high-end printers. The homeowners policy anticipates you might have some items used for business at your home, but not more than a few. For many new claims reps, their first tough call is to a policyholder whose loss exceeds a special limit.
For years after I started handling claims, I figured the $1,000 in jewelry coverage on my policy was sufficient to cover what little jewelry I owned. Although it was worth more than $1,000, it was rarely in the same place at the same time (some of it was always on me while the rest was at home). When I inherited my mother’s jewelry, I knew to increase my coverage to address the increased value of my collection (one of the benefits of working in the insurance industry!). Whenever I admire a new item a friend has received as a gift, I take the opportunity to ask them if they have it properly insured. Some have laughed and said I seem more like a salesperson than a claims representative, but I want to avoid breaking bad news to them after a loss.
Think you have enough coverage for those “Special Limits” items? If you aren’t sure, take a minute to go over your coverage with your insurance agent. You may be very glad you did!