Were you one of the lucky individuals who received jewelry as a gift this past holiday season? Or perhaps you received something special for Valentine’s Day? In either case, here’s the important question that you need to ask yourself: “Did I properly insure my new valuables?”
Many homeowners insurance policies contain a section titled “Special Limits of Liability” that may cap how much the policy will pay for certain classes of property. These categories may include:
- Money, bullion, gold, and silver
- Jewelry, watches, furs, and precious stones
- Firearms and related equipment
- Silverware, goldware, platinumware, and pewterware
The specific limits for each category vary by insurance company. In addition, policy endorsements may increase these amounts over the limits that are included in the base insurance policy, so you’ll need to check your policy to see how much coverage you have.
Nevertheless, there are still a couple of drawbacks if you rely on this section of the homeowners insurance policy to cover your more valuable possessions:
- The coverage is subject to your policy deductible; and
- Coverage may be provided on a replacement cost or actual cash value basis rather than an agreed value basis.
The best way to insure these valuables is to schedule them on a valuables article endorsement or policy (also known as “inland marine coverage” to those of us in the insurance industry). For a relatively small amount of additional premium, you can cover specific items on an agreed value basis – and, better yet – there won’t be a deductible should you have a loss to one of the covered items! Lastly, the covered perils on such a policy may be broader than the perils that are covered by your homeowners policy.
At this point, you’re probably wondering what “agreed value” coverage is since I’ve mentioned it twice. To illustrate, let’s say you buy a new watch for $1,000 that you would like to have covered by insurance. The watch is then stolen shortly after you purchased it. If the coverage is provided on a replacement cost basis, the insurance company will depreciate the replacement cost value of the watch for an initial actual cash value payment. The replacement cost valuation may also be a lesser amount than what you paid for it if they can find the same new watch being sold somewhere else for an amount under $1,000. If coverage is provided on an actual cash value basis, the value will be determined by subtracting depreciation based on age and condition from the replacement cost value of the watch.
On the other hand, if the watch is scheduled on a valuable articles policy on an agreed value basis, the insurance company agrees to pay you $1,000. This obviously eliminates some of the back-and-forth that can occur during a claim and also allows you to purchase a replacement watch from the same company where you purchased your original one (provided the price hasn’t changed).
This type of insurance is available for the aforementioned categories as well as for other valuable property such as artwork, cameras, musical equipment, and collectibles. Ask your independent insurance agent for additional details so that you can take the next step toward properly covering your valuables!
The information above is of a general nature and your policy and coverages provided may differ from the examples provided. Please read your policy in its entirety to determine your actual coverage available.
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