Understanding homeowners insurance coverage limits

Homeowner’s insurance policies will have coverage limitations for the building, contents, other structures, and additional living expenses, but your homeowner’s policy will most likely have special limits that apply to certain types of personal property. This will affect the amount of coverage available and you should be aware of the limits of your policy. Standard industry forms will have the same limitations, but some insurance companies can adjust those limits to make their policies more attractive to consumers.

To provide an example of how your special limits might work, imagine that a theft loss occurs while you were away from home. Let us also imagine that the thieves were somewhat creative. They broke into your house, and found all of this great stuff to steal, but their car was full of stolen items from your neighbor’s house, which they also just knocked off, so they had no more room for your stuff. While standing in your backyard wondering what to do, they found your boat next to the garage and decided to fill that with all your great stuff, then they hooked it up to their car and drove off. Let’s imagine that they took your secret hidden $1000.00 in cash from under your mattress, your wife’s $10,000 mink coat, $15,000 worth of jewelry, your antique shotgun valued at $4,000.00, and a $5,000 set of silverware. An unendorsed homeowner’s policy will pay the following:

* Cash $200.00

* Boat and trailer $1,000.00

* Mink coat and jewelry $1,000.00

* Antique shotgun $2,000.00

* Silverware $2,500.00

As you can see, only $8,500 of the $35,000 loss will be covered under a typical homeowner’s policy. This is due to the special limitations for personal property in a homeowner’s policy that limits recovery. Standard industry forms for the most part contain the limits noted above, in addition to other specific limitations. Some of the special limits only come into play for certain types of losses. For instance, loss to jewelry is limited to $1,000.00 for theft only.

Insurance companies have developed alternative forms to override these standard limitations, and there are endorsements you can purchase to place agreed value limits for certain types of personal property. For example, the Coverage C Increased Special Limits of Liability Endorsement will allow increased limits for certain types of personal property. Additionally, a Scheduled Personal Property Endorsement can be added to your policy, which will increase limits to an agreed value for Jewelry, Furs, Cameras, Musical Instruments, Silverware, Golfer’s Equipment, and Fine Arts. This endorsement can also expand the types of losses that are covered for personal property. Under an unendorsed policy, personal property is only covered for specified causes of loss.

The above noted limitations are just a few examples of the types of personal property subject to the special limits of liability. Become familiar with the special limits of your own policy, and talk to your agent about additional insurance for those items that may warrant it.