Christmas Gifts and Insurance
Timely article from IIABSC as we approach Christmas.
‘Tis the Season to Protect Gifts
If you’re giving and getting gifts this holiday season, think about protecting the gifts. Americans spend handsomely during the holidays.
Trusted Choice® insurance agents and brokers suggest you to take stock of what you own – and how it’s insured – soon after you finish unwrapping the Christmas gifts.
Most consumers protect what they own with homeowners or renters insurance. Homeowners insurance covers personal property for a percentage of the insured value of the home. For instance, a $300,000 home might have its possessions insured for 50 percent of that amount. While $150,000 might seem like a large number, the value of clothing, electronics, furniture and kitchen appliances in the home adds up. Homeowners coverage will reimburse a consumer if those items are damaged by fire or stolen.
Around the holidays, the value of what you own can change quickly. Rest assured that, when someone in the family gets new electronic equipment or jewelry for Christmas, those items are automatically insured by homeowners or renters coverage. But that coverage might be limited, so it’s timely to check your insurance now.
There are two limitations on coverage for possessions: 1) amount of coverage and 2) risks covered.
Amount of Coverage. Homeowners insurance may cover personal property for actual cash value and not replacement cost, depending on the policy. For example, a piano purchased five years ago has declined in value due to wear and age — this is known as “depreciation.” Your insurance contract may reimburse the actual cash value (original cost, minus depreciation) of the piano, and not for the price of a new piano to replace the one that was damaged in a fire.
By contrast, replacement-cost coverage is based on the amount it costs to buy a new piano. Replacement-cost coverage costs about 10 percent more, notes the Insurance Information Institute.
Additionally, many homeowners policies put a dollar-amount cap on certain categories of property. So even if you have a large amount of personal property coverage on your homeowners policy, you might have a “sub-limit” of $2,000 for jewelry. In that case, a new pair of diamond earrings, combined with an engagement ring, might push the value of the jewelry above the limit. (Even replacement-cost policies have sub-limits for certain types of property such as furs and jewelry.)