Did you receive jewelry, art, furs, family heirlooms or expensive electronic equipment as a gift this holiday season? Expensive holiday gifts are a good reason to review insurance coverage, advises the Insurance Information Institute (I.I.I.). While the prospect of losing your gift can feel heartbreaking, the gift itself can be replaced– but only if you have sufficient insurance coverage in place. Otherwise, you could be stuck footing the bulk of the replacement bill yourself.
Most homeowners and rental insurance policies do include coverage for personal items such as jewelry and furs. However, these standard policies typically have coverage limitations or caps that may be much lower than the actual value, reports I.I.I. In many cases, to properly insure jewelry and other expensive items, additional coverage is required.
Let your insurance agent know that you are now in possession of a new piece of jewelry or other expensive items. Be sure to talk about your current coverage limitations and whether supplemental policies are necessary.
Keep in mind the difference between actual cash value and replacement cost coverage. When personal property listed on your homeowners insurance policy needs to be replaced, these items are typically replaced at fair market value. This means you’ll receive the replacement cost minus depreciation. That’s bad news for items that rapidly depreciate, like electronics. Your 60” flat panel TV may have cost $1,100 a few years ago, but the fair market value could be closer to $750 today– hardly enough to buy a similar replacement model. With actual cash value coverage, you’d be stuck picking up the difference. With replacement cost coverage, on the other hand, you will be reimbursed for what it would cost to purchase new at the time of the claim. While replacement cost coverage is more expensive than actual cash value coverage, the value of your items may offset the smaller policy difference.
A third coverage type associated with scheduled personal property is called stated value. Stated value means an item is insured for a specific dollar amount and should there be a loss to the insured item, the specific dollar amount is the amount you may receive, even if the value of the item has gone up, should you have a covered loss.
If you are purchasing scheduled personal property insurance for the first time, don’t be afraid to ask questions about your different coverage options– that’s why your agent is there. Common questions to ask include:
- Is the coverage only good if the item is stolen, or does it cover accidental loss, like having a ring fall down a sink drain?
- Is the item insured for a full replacement, or a fair market value?
- If an item is stolen, like a ring, how will you need to prove its loss to make a claim?
- Are there any circumstances of loss that are not covered?
The amount of coverage you need for an item is determined by the appraisal, not the final sales price you or a loved one paid to purchase it.
If you are obtaining insurance coverage for a new piece of jewelry, for example, know that an appraisal is different from a diamond grading report. The appraisal assigns value to the entire piece of jewelry, including the diamond, other stones, and metal. Once you have an appraisal in place, you’ll take this to your insurance agent in order to get a rider or additional coverage for the jewelry. Should your jewelry be stolen and later recovered, you could also use the appraisal as proof of ownership to claim the jewelry from the police. You will also need appraisals for furs, artwork, and family heirlooms.
As an additional safety step for artwork, document the condition of the piece by taking photographs and adding detailed notes on the dimensions and framing method. Keep these notes together with the original bill of sale and any additional appraisals.