Your new engagement and wedding rings are beautiful, and your husband paid dearly for them.
You got a new big-screen plasma television for Christmas, with a home theater system.
You bought a new computer so that you can play the latest games (and maybe use it for your finances, too).
These are all major purchases, and they are things of which you are proud. And you should be! But what if something happened to them? Do you know if your homeowners or renters policy will cover them? Do you know if they will be replaced at the full value, or if the payment will be reduced for depreciation? Do you know if they are covered if they are stolen, lost, or broken?
In this article, we will examine jewelry, electronics, and computer equipment separately. As always, you should check with your agent, because each company's policy is a little bit different.
What does a typical homeowners policy cover?
In the standard homeowners policy, your personal property-including jewelry, electronics, and computer equipment-is covered under “Personal Property Coverage. " This coverage usually applies anywhere in the world, so your jewelry would be covered if you were traveling and it were stolen from the hotel, for example; or your computer would be covered if it were stolen from your car. (There might be a limitation of 10% of the total coverage for property that is away from home. )
However, most policies have some very important limitations:
* Only losses caused by certain events are covered, including fire, theft, lighting, smoke, wind, and some others. Simply losing an item is not covered under most policies; nor is dropping your wedding ring down the garage disposal if you set it on the back of the sink while you wash dishes. Dropping the plasma television would not be covered.
* If jewelry, watches, or precious or semi-precious stones are stolen, the maximum amount is usually limited to a certain amount, often $1,000 or 1,500.
* Many policies limit the coverage for computer equipment to $1,500, $2,500, or $5,000. (If you use your computer equipment for business, you should talk to your agent about how your policy covers business property. )
* The amount of coverage is usually limited to the actual cash value, which might be adjusted for depreciation. If your computer or television is a few years old, you might find that the insurance payment is not enough to replace the item.
Some companies remove some of the limitations, such as the limitation on computer equipment. Each company's policy is different, so you should speak to your agent for more information.
What if you want coverage for the full replacement cost?
Most people would be unhappy if their five-year-old big screen television were stolen, and they found out that their payment would be reduced because of depreciation. This is the difference between replacement cost and actual cash value. Replacement cost is payment that is sufficient to purchase a new television to replace the stolen television. A five-year-old television, however, is not worth as much as a new television, because part of its life is already used up. Actual cash value is a payment that has been reduced because of depreciation. The guiding principle of insurance is that it should restore you to your position before the loss, so if you had a five-year-old television replaced, you should be able to buy another five-year-old television.
Most companies recognize that their policyholders want to replace their property with new property. Some companies have expanded their policies to include replacement cost automatically. Other companies make it available as an option. Ask your agent whether your personal property is covered for replacement cost or actual cash value; and if it is not covered for replacement cost, ask how much it would cost to enhance your coverage. You will be much happier when you have a claim.
Although most companies do not require it, your claim will go much more smoothly if you have the model number and serial number of valuables like these, if not the original receipts.
What other options do you have to cover jewelry?
You will want more coverage than the basic policy includes if you have valuable jewelry (wedding and engagement rings are the most common). The basic policy limits the jewelry coverage so that people without jewelry do not have to pay for coverage that they do not need; but anybody with valuable jewelry can get the additional coverage for a modest cost.
The best way to do this is by listing the specific jewelry items and purchasing coverage for those items. Some companies list them on your homeowners policy, and some put them on a separate policy. Your agent might refer to this as “scheduling" it, or putting it on a “personal articles floater. " This coverage is called a “floater" because your jewelry can be moved around the world ("float") and still be covered. Most floaters will cover jewelry anywhere in the world, even if you are traveling outside the country.
A floater usually covers jewelry for almost anything that can happen to it. Certain things such as intentional acts or wear and tear are never covered, but almost everything else is covered. If you throw your ring in Lake Erie because you are mad at your husband, it is not covered; but if you drop it in Lake Erie accidentally, it is covered.
What if you use your computer equipment for business?
Your homeowners policy is designed for personal use only, not for business. Many people have occasional business use at home, however, so the policy includes some very limited coverage.
Insuring a home-based business is beyond the scope of this article. Talk to your agent to make sure you are properly covered, and read our article on insuring a home-based business. There are several options, depending on your specific circumstances.
Contact your agent!
Policies vary widely from company to company and from state to state. Contact your agent for more information on what your current policy covers.
Your personal property is one of your biggest assets, so you need to protect it properly. More importantly, these are your dreams! A wedding ring is not just a piece of metal with a stone. It is a symbol of your marriage. If your policy can't be adjusted to get the coverage you need, consider shopping for a different company. And if your agent can't answer your questions, consider shopping for a different agent. This type of consultation is the agent's job. It's why you pay him! Don't you deserve to have your property protected properly?
Ms. Perry had about 15 years of product management experience before she opened her agency just outside Columbus, Ohio. Because of her background, she focuses on annual protection reviews with her customers, helping them to find what their policies cover and what is excluded. For more information about the types of things you should discuss with your agent in your next annual protection review, please visit her web site at http://www.community-ins.com