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Insuring Your Valuables

In "Me and Bobby McGee," Janis Joplin sang, "Freedom's just another word for nothing left to lose." Maybe, but if you've got lots to lose, the word you're looking for is insurance. And if what you have are valuable personal possessions--jewelry, furs, antiques, art, coin collections, and the like--you need to know how to insure them.

Your homeowners insurance alone may not be enough

Generally, your homeowners insurance policy covers the theft, damage, or destruction of your personal property, but several limitations apply. Your personal property is covered only for its actual cash value. This valuation method 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 receive in an insurance settlement may be considerably less than what it will cost to replace the item. If the item was one that might actually increase in value over time (e.g., a work of art or a musical instrument), your real loss will be that much more.

The total coverage for all of your personal property is limited to 50 percent of the coverage on your home itself. This means that if your home is covered for $150,000, your entire personal property coverage--the protection for all of your possessions--is limited to $75,000. 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 percent 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. The following are some of the standard limits (which may vary among policies):

  • $200 for bank notes, bullion, gold, silver, coins, and metals
  • $1,000 for securities, deeds, manuscripts, passports, and tickets
  • $1,000 for the theft of jewelry, furs, watches, and precious and semiprecious stones
  • $2,000 for the theft of firearms
  • $2,500 for the theft of silverware, silver-plated ware, goldware, gold-plated ware, and pewterware
  • $2,500 for property at the residence used for business purposes
  • $250 for property used away from the residence for business purposes

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 your coverage with endorsements or floaters

If you want to make sure that your valuables have better coverage, talk to your homeowners insurance agent. You may be able to obtain 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 policy's original terms. Personal property floaters can be purchased 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 will it cover you for losses due to volcanic eruptions or civil commotions? An open perils floater expands your coverage from the named perils specified in your homeowners policy to coverage for all types of losses that aren't specifically excluded in the floater.

A personal effects floater offers worldwide coverage for your personal property. With this floater, 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 floater to protect your 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, consider purchasing this 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 will still apply--they'll just be higher.

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. In a sense, an independent appraisal settles the amount you will 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.

It's important to know that 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--faded oil paintings, stained silver goblets, or the scratched doubloons in the coin collection, for instance.