Most homeowners’ insurance policies focus on the replacement value of the home itself. There are numerous tools used by insurance companies to estimate the replacement cost of a home. Many of these tools are now being enhanced with artificial intelligence to allow satellite images and orthogonal images to determine the number of stories, square footage, and complexity of the foundation shape as key elements for estimating values. With the recent high inflation trends for construction costs, these efforts are a primary focus of the insurance companies. Our article on Insurance to Value details this process.
Contents values are a second thought in many cases. The insurance company assigns as percentage of your building value as contents values. There is no data gathering effort to validate these numbers.
To shield themselves against litigation around inadequate values, many insurers now banket the building and contents into a single limit. Since the vast majority of claims are partial losses, this means that any value issues are minimized. This process is considered user friendly, and most people don’t give it a second thought. You see a large number and assume that all is covered.
Special Limits of Liability
Within your homeowner insurance policy there are a number of items in your contents that have a sublimit. These are limits of coverage that limit the dollar amount of coverage for specific types of property. The table below shows limits of coverage for a typical homeowner policy.
You should carefully evaluate your personal property to see if the above sub-limits are adequate for your personal belongings. If you have more values exposed to loss than the policy provides, you need to ask for additional coverage.
Form Differences
Also look carefully at which form is used for your homeowner’s policy. The coverage offered vary depending on the perils covered for any of these items. We have written articles on the differing policy forms and the terms that affect contents coverage in our Homeowner forms article and our article on Jewelry Floaters. The difference is often between coverage for loss and mysterious disappearance or coverage for only theft for jewelry, firearms and other property with special limits of liability.
Value Creep
There is a tendency in the insurance business to treat the floater policy limits as a “set it and forget it” type of number. The flaw in this approach is that people tend to accumulate more stuff as times go past. It is not uncommon for a single jet-ski to have a second join the family. New pieces of jewelry are acquired, and any number of other collectibles are added. The insurance companies do not help with this process as they do not attach the actual list of items to the policy or renewal documents. You must remember additions and deletions and communicate that to your agent.
Inflation also affects these items. A recent interaction with a customer revealed that over the past five years the value of the firearms in his collection has increased by 30%. Additional jewelry acquired added 20% to the limit. Accurate values for these items are critical as many forms have a specific limit per item, the value you specify. If the value of the item has appreciated, you need to raise your item limit of coverage to match that higher value.
Inventory
One of the most valuable processes you can do to protect yourself against loss is to have an accurate inventory of your personal belongings. Cell phone cameras and video have simplified this process. You can go through your home and record the overall contents of the room, and then record the contents of each drawer, shelf, or closet in that room. Save this to your cloud account so you can easily retrieve it when needed. By making this record, at time of loss you have a tool that can help you recreate the contents and have a record of what was present. If you want to go into greater detail, there are Excel templates that can be used for building a home inventory.
The Driehaus Difference
We understand that every home is different. The replacement costs can vary and the need for content coverage is no different. If you are not aware of the limits specified for certain property, you would not know you need to schedule this coverage. We know these limitations and will ask the second level questions that will tailor the coverage to your needs. We take the time to get to know you and to understand how insurance fits in with your life. Call us at 513-977-6860 or contact via our website, www.driehausins.com. We look forward to help you with your insurance needs.