How do you insure your engagement ring, wedding ring, other jewelry, tools, computer equipment, artwork, stamp & coin collections, guns, musical instruments, silverware,  and other valuables?

As mentioned in my blog post regarding Homeowner insurance contents coverage, certain types of personal property are limited for coverage under the basic homeowners insurance policy.

The reason for the insurance company limiting the coverage is because some of these items are popular targets for theft, and not everyone has these items. Not everyone has $10,000 worth of jewelry, and if not for the policy limitations, people without jewelry would pay higher rates for those claims involving theft of expensive jewelry.

Other items you may own are excluded or limited for coverage under your homeowners insurance policy, because they are meant to be insured by separate insurance, such as cars, motorcycles, boats, ATVs, trailers, aircraft, watercraft, snowmobiles, dirt bikes, etc. If you own any of these items, or anything with a motor, consult your agent to see if you need a separate policy for them.

Review with your insurance agent all the coverage limitations and exclusions, and have your agent adjust your coverage to meet your needs.

Broader coverage can be purchased for jewelry, watches, furs, guns, tools, musical instruments, silverware, pewterware, goldware (including trophies), artwork, coins, stamps, cameras, computer equipment & other items.

A popular choice for many people with jewelry, such as an engagement ring, is to buy broader coverage, and insure each item for a specific amount. Items insured this way on a homeowners insurance policy are called Scheduled Personal Property.

If a ring is scheduled as personal property on your homeowners insurance, it normally has no deductible, and you are covered for events like “mysterious disappearance” — where you no longer have the ring, you don’t know where it went, and there is no evidence of theft. You are also covered if the stone falls out of the setting and goes down a drain pipe.

It’s great to have the broader coverage, but it encourages filing smaller & frequent claims. Filing one claim raises your rates. Filing 2 claims in 5 years can get your homeowners insurance canceled.

Here is what I recommend:

1. Know what property is limited by your homeowners insurance, and the dollar limitation per item, as a category, and under what circumstances (Jewelry, for example, is limited for coverage only for theft).

2. If you own any of the property subject to limited coverage, know the value of each item, and the total value for the items in that category.

3. Compare the limits to what you have, and figure out how much you have to lose if you have a claim.

4. If the potential loss would not cause you financial hardship, or you could live with the loss of the property, you may decide you are okay with the limits of the basic homeowners policy.

5. Look to non-insurance ways to protect your property. If you have jewelry, keep it in a vault (you can usually get a discounted insurance rate to schedule jewelry normally kept in a vault). If you have guns, keep them in a gun safe. Get a monitored alarm for your home. Relying on your homeowners insurance to pay theft claims, instead of doing everything you can to prevent theft, is a recipe for getting your homeowners insurance canceled for claims.

6. If you decide you want or need better insurance coverage for your high value items, consult your agent to let you know your options.

7. Consider buying a separate policy to insure your high value items. Many companies no longer offer a separate policy to schedule high value personal property, but an independent agent should be able to find one & get a quote for you.

There are two advantages for having a separate policy for your high value items:

a. If you have a claim, it won’t increase the rate of your homeowners insurance, or put it at risk of cancellation.

However, if you shop your homeowners insurance within 5 years of filing a claim on this separate policy, the quotes you receive will be higher, or you may be ineligible for coverage, due to treating this claim as a property claim as if it was paid by your homeowners insurance.

b. If your mortgage company pays your homeowners insurance, your monthly escrow will be lower than if you had a higher homeowners insurance premium due to scheduling high value items.

Here are a few examples to show you what you need to consider:

Your homeowners policy has a $1,000 per item limit, $2,500 per category (for all your jewelry items) if your jewelry is stolen.

Customer #1 has $6,000 of jewelry, with the most expensive item being $2,000. The customer understands how the limits above apply to their jewelry — if the $2,000 jewelry item is the only thing stolen, the most the policy will pay is $1,000, and if all jewelry is stolen, the most the policy pays is $2,500.

The customer decides they will pay the cost themselves if their jewelry is stolen, and use their homeowners insurance only for very large claims they cannot afford to pay out of pocket.

Customer #2 has only one jewelry item — an engagement ring worth $10,000. Customer #2 would want the ring replaced if something happened to it. Customer #2 decides to pay extra to schedule the ring for $10,000 on their homeowners insurance.

Customer #3 has $75,000 worth of jewelry and a $100,000 art collection. Customer #3 decides to insure the high value items under a separate policy.

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