According to the FBI, in 2014, property worth more than $12 billion dollars was reported stolen, and about 77% was never recovered. Many people remain under the misconception that their homeowners policy provides coverage for all the personal belongings in their homes, regardless of the type of property. That’s not entirely true, and every year, many policyholders learn this the hard way when their valuable personal property is damaged or stolen.
Moreover, many homeowners don’t carry enough personal property insurance, also called contents insurance, on some of their most valuable possessions. Even worse, renters notoriously overlook personal property insurance for several reasons, typically because they believe their landlord’s insurance covers their property as well. It is important for homeowners and renters alike to obtain and maintain the correct type and amount of contents insurance to ensure their valuables will be replaced after a loss.
Over the years you may have collected, inherited, or received as gifts treasured jewelry, artwork, firearms, antiques and other precious personal property. These items are also valuable to thieves, who have stolen $1.5 billion in jewelry and $139 million in firearms; only 4% of the jewelry and about 10% of the firearms have been recovered. If you think you are fully covered by your homeowners insurance for the loss of these and several other categories of precious possessions, you may be wrong. The contents insurance of your homeowners policy contains sub-limits for valuable items like jewelry, firearms, artwork, and furs.
If you don’t add the right level of coverage for these valuables under your personal property endorsement (or rider), you can expect to pay the full cost for the loss of those items in a fire, natural disaster or theft.
The Basics of Personal Property Coverage
The personal property insurance section of homeowners and renters policies has two very distinct coverage gaps that every policyholder should understand and address to make certain their property is covered sufficiently:
Valuation: Your insurance policy has a valuation clause regarding how it determines the value of your personal property at the time of a loss, and there are two methods for doing this. You decide which method should be used when the quote is calculated and the application completed. One method is actual cash value, which is calculated by using the purchase price minus depreciation. The other, and more popular, method is calculated by establishing replacement cost, or the cost to get the item new, and using that amount of reimbursement. With both methods, the deductible you select on the application is subtracted from claim payments.
Sub-limits: Homeowners insurance companies have determined that some categories of personal property are much riskier than others, and as a result, they have established sub-limits for payment in those cases:
Most homeowners and renters policies allow policyholders to increase the limits on some or all of these categories with endorsements and additional premiums. Policyholders may also elect to "schedule" any items whose value exceeds the sub- limits assigned to their category. This is also done with endorsements and paying additional premiums.
For all of these reasons, it’s important for you to talk to your independent insurance agent about the right contents insurance endorsements for your homeowners policy. Finding that you have coverage gaps after a claim can be financially devastating. You can prevent this from happening by asking questions during the quote and application process.
Should Renters Also Get Personal Property Coverage?
According to a 2014 Insurance Information Institute poll, while 95% of homeowners had homeowners coverage, only 37% of renters had renters insurance. Several reasons were mentioned, but typically the perceived cost of the insurance and underestimating the value of their property were contributing reasons. Another reason is that many renters assume that as long as their landlord has coverage for the unit they’re renting, they have coverage for their property as well. Unfortunately, this is not the case.
Your landlord’s insurance will not cover your belongings if the structure in which you’re renting burns to the ground. If your rental is burglarized and your personal property stolen, your landlord’s contents insurance will not cover that, either.
In fact, your landlord’s insurance will only cover losses related to the structure. If you haven’t purchased contents insurance for the apartment, condo, or home you are renting, you will have to pay out-of-pocket to replace your property.
The loss of use coverage in a rental policy also has an effect on your personal belongings. If your apartment was unlivable because of a fire, your loss of use coverage would reimburse you for the additional expense of a temporary rental while your apartment or home is under repair. This would include temporary storage expenses for your belongings.
The bottom line for renters and homeowners is basically the same regarding contents. In order to get the right amount of coverage for your personal belongings, speak with your insurance agent and consider every coverage and whether it provides the appropriate protection specific to your needs.
