Insuring Your Valuables

If you have valuable personal possessions – such as jewelry, furs, antiques, art, coin collections, and the like — insurance is often necessary. But your homeowners’ or renters’ insurance might not be enough.

Limitations on coverage

Generally, homeowners’ insurance policy covers the theft, damage, or destruction of your personal property, and there are several limitations. Your personal property is covered only for its actual cash value. This valuation takes into account the property’s depreciation, or its reduction in value as a result of wear and tear over time. As a result, the amount you get in an insurance settlement may be considerably less than what it costs to replace the item. That’s understandable for property like a car – but if the item were something that might actually increase in value over time (a work of art or a musical instrument) — then your real loss could be that much more.

The total coverage for all of your personal property is limited to 50% of the coverage on your home itself. This means that if your home is covered for $1,000,000, your entire personal property coverage — the protection for all of your possessions — is limited to $500,000. In addition, if the personal property is stolen from or destroyed in a secondary residence (like a summer home), your homeowners’ policy may limit your coverage to 10% of your personal property limit. In some cases, your valuables may not be covered at all if they are lost, stolen, or destroyed while you are traveling.

In addition, specific categories of personal property have separate limits of coverage. For some categories, your homeowners insurance policy may set a limit only on claims resulting from theft. This minimizes the insurance company’s exposure to fairly common occurrences. The damage or destruction of these items is less likely, so insurance companies are usually willing to cover them up to their actual cash value.

Improve coverage with endorsements or floaters

If you want to make sure that your valuables have better coverage, talk to your insurance agent. You may be able to buy additional coverage by modifying your policy with an endorsement or a “floater.” An endorsement is a written agreement to add (or subtract) coverage to the homeowners’ policy. Once it’s attached, the terms of the endorsement take precedence over the original terms. Personal property floaters can be bought as supplements to your homeowners’ policy. Endorsements and/or floaters can let you expand the types of losses you’re covered for, insure your valuables regardless of their location, and/or increase the amount of coverage on particular items or classes of items.

Your homeowners’ insurance may protect you against certain types of loss — losses due to theft, fire, or burst pipes, for instance. But do you know if it covers you for losses due to volcanic eruptions or civil commotions – or pandemics? An “open perils floater” could expand your coverage from the named perils specified in your homeowners’ policy to coverage for all types of losses.

A “personal effects floater” offers worldwide coverage for your personal property. With this, your personal property is insured regardless of where you take it. If you have children away at boarding school or college, you may want this to protect personal property away from home. If you travel, you can purchase this floater on a short-term basis to cover a specific trip. If you travel regularly with valuables, consider buying coverage on a permanent basis.

A “blanket coverage personal articles floater” raises the coverage limits for nine categories of personal property: jewelry, furs, cameras, musical instruments, silverware, fine arts, stamps, coins, and golf equipment. If no one item in your collection of valuables is worth over $2,500, this blanket coverage floater may be a good option for you. Note, though, that coverage limits still apply, they’ll just be higher.

Stand-alone policies

If your homeowners’ insurance policy offers inadequate or no protection for items with higher values, some companies offer valuable items insurance as stand-alone policies (or as floaters on their own homeowners’ policies). For maximum coverage, you may choose to have these items separately listed and specifically insured. In many such cases, the insurance company will require you to have each item independently appraised, which in a sense, settles the amount you would receive in the event of a loss even before the loss occurs. Once the insurance company accepts documentation establishing the worth of an item, there’ll be no need to haggle with the adjusters if you have to file a claim later.

However, even special policies will not cover your property in some cases. Although these policies offer very broad coverage, they won’t pay for losses due to nuclear explosions, acts of war, or intentional acts of destruction. In most cases, they also won’t pay for losses due to natural deterioration – like faded oil paintings, stained silver goblets, or the scratched doubloons in the coin collection.

Blue Spark Capital Advisors

We're a fee-only Registered Investment Advisory and financial planning firm based in New York City and the Berkshires.

We specialize in working with women after divorce, death of a spouse, or other life transitions such as retirement or job change. We provide financial planning and investment management services.

We believe in a holistic approach. Movement in each piece of your financial plan impacts the others, so we consider your entire picture.

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