Personal Property Insurance Strategies For Maximum Protection

One of the biggest problems that homeowners face when taking out home insurance is in making sure that their policy provides them with full coverage against all major areas of risk.

One would naturally expect that if you take out adequate home insurance, that you will be covered against all forms of loss. Unfortunately however, this is not the case, as there are certain exclusions which if you are not specifically covered against, could result in your insurance claim being denied or you receiving less compensation than you were expecting.

What type of coverage you receive from your home insurance policy will largely depend on how much you are willing to spend to maintain it. Generally speaking, the more expensive a coverage plan is, the more things that you will be insured against and the less risk you will have of suffering from an uninsured loss.

As a homeowner, you therefore need to balance the cost of maintaining a policy with the potential financial risk reduction that it offers you.

Whilst everyone would like to be fully insured against all forms of risk, for most people, the expense involved in doing so does not make this a viable option. As a result, rather than insuring yourself against everything, you insure the risks which you feel the most vulnerable to.

In order to do this however, you also need to be aware of what sort of coverage your existing polices are providing you with. Having this information at hand will allow you to identify areas of risk that you are currently exposed to and so may wish to insure, or coverages for risks which are no longer a threat and so could be removed.

When it comes to personal property insurance, things are no different. You need to determine what sort of coverage you are getting, and then decide whether or not that coverage provides you with an adequate level of protection. Failure to carry out this simple step can result in two outcomes, both of which will end up wasting your money.

The first outcome is that you underinsure yourself, which means that if you ever make a claim to your insurer that you don’t receive full compensation for your losses. The second outcome is that you overinsure yourself and end up paying for additional coverage which you don’t benefit from.

Personal Property Home Insurance

The three main reasons why personal property insurance claims fail are due to dollar limits on the coverage you receive, specific losses which are excluded from your policy, and difficulties in determining the exact value of your loss.

In this article, we will look at some of the strategies that you can use to adequately insure your personal possessions, and then get the full amount in a settlement claim if any of your items are lost, stolen or damaged.

Please note however, that these steps should be carried out before you make a personal property claim, as if you leave it to when you need to make a claim, it will likely be too late.

1) Increase Your Dollar Limit Coverage

In most cases, you will find that your standard homeowners insurance policy places dollar limits on the amount of coverage that you receive for particular items. This means that any loss above that limit, you will not be compensated for by our insurer.

However, most insurance companies allow you to take out an extended personal property insurance plan which lets you raise the dollar limit for coverage on specific items.

For example, if you have expensive jewelry which you keep in your house, the standard $1000 coverage limit may not be enough for you. In such a case, you could take out an extended policy so that you are covered at a higher limit such as $2500 or $5000.

As a general rule, you should always make sure that the limit in your section C personal property insurance policy will be enough to cover all your valuable items in the event that they are lost or stolen. The good news is that you can do this relatively cheaply.

For example, extending your jewelry insurance cover from $1000 to $5000 will only cost you around $25 a year extra, which is something that is definitely worth doing if you keep expensive jewelry in the house.

General Items

Just as you have limits for specific items, you will also have general coverage limits for all the items in your home. What this limit is set at, really depends on how many items you own and their combined value.

To get an estimate of the level of coverage that you are likely to require, you should make an inventory list of all the items in your home and their approximate value when you purchased them. Ideally, this should be done by taking a photo of each item along with its original receipt.

If you have such an inventory list, you will be able to show this to your insurance company if you ever need to make a claim. This will provide them with both proof that you actually owned the item in question, and most importantly, proof of its original value.

The following video provides some good information on how to properly document the items in your home.

Getting The Money You Are Owed

To ensure that you are fully compensated for lost or damaged possessions, it is absolutely vital that you take out replacement cost rather than actual cash value coverage.

The reason for this is that with a replacement cost policy your insurer will give you the full amount of what your claim item costs to buy new today. With an actual cash value policy however, your insurer will only pay out about 50% of that items original value.

It is worth noting though that a replacement cost policy is the more expensive of the two options, but considering the fact that it could one day save you thousands of dollars in uninsured losses, paying that little extra expense will be more than worth it come claim time.

This after all, is the whole purpose of having a home insurance policy, to give you peace of mind knowing that you are adequately protected against a significant risk factor in your life.

2) Cause Of Loss Coverage

Whilst raising the dollar limit on your personal property insurance will provide you with a higher coverage limit, that limit is no good if you lose your personal property under a loss which is not covered by, or is excluded from, your homeowners insurance policy.

In order to provide full coverage for your personal property, you may therefore wish to list certain items as an amendment to your basic policy. This will protect you against virtually any type of loss, barring a handful of exclusions, although you will have to pay an additional premium to receive this coverage.

One advantage of using cause of loss coverage is that in order to list something as an amendment you will have to provide proof of its value at the time you insure it. This can be extremely useful for high value items which are very rare or old, such as paintings, as once your insurer has agreed to list your item for a specific amount you can then rest assured knowing that you will receive that amount in a claim settlement.

If however, you tried to insure such an item without cause of loss coverage and then it was later stolen, you are likely to find it much more difficult to get your insurer to agree upon its true value. Unfortunately for many people, this has resulted in them getting far less that their item was worth in their settlement payout because they couldn’t prove to their insurer the true value of their claim item.

Inflation Coverage

One downside to having cause of loss coverage is that it does not provide you with automatic inflation coverage. So if the item that you insure increases in value each year, it will only be insured at the value for which it was originally insured.

In order to avoid losing inflation insurance coverage, you would need to get your items reappraised every year and then give your insurance company the new value for your item. This however, is likely to involve an added expense, so whether or not you choose to do this really depends on the value of the item in question and how quickly its value appreciates over time.

For high value items that appreciate quickly, getting the item reappraised every year is probably the best thing to do, as otherwise you could be left significantly underinsured. But if you find that your rare or valuable item has depreciated, then sticking with you original valuation would be the best thing to do.

To find out more information about insuring rare or valuable items, please see the following articles:

Insurance For Jewelry
Musical Instrument Insurance
Insurance For Antiques & Artwork
Insurance For Coin Collections
Stamp Collection Insurance

3) Special Perils Coverage

Another insurance strategy that can be used to deal with the problem of excluded causes of loss is to buy an optional insurance policy called special perils or open perils contents coverage.

Essentially, a special perils insurance policy widens the level of coverage that you receive for your personal property so that you are protected against a wider range of losses. In contrast, a broad form causes of loss policy will only insure you against a limited number of specifically named perils, and anything that has not been listed, you will not be insured for.

Open perils covers virtually all forms of loss no matter how strange they are. There will be specific exclusions however, and these will usually include exclusions such as loss due to earthquakes, floods or breakage of fragile items.

If you have a very valuable item that no other policy can adequately insure you with, then taking out special perils coverage is probably your best option to safeguard yourself from suffering a major uninsured loss.