The holidays have arrived, and when it comes to holiday presents, whether insurance will cover an item is generally not top of mind. However, it’s important not to assume that your homeowner’s insurance will cover any expensive gifts that you may be giving or receiving, such as computers, jewelry, or even a vacation package.
Giving a nice gift? Consider your own insurance first
Suppose you purchase a new stereo for your brother, place it in your trunk, and head home from the store to wrap the gift. On your way back home, you decide you need a cup of coffee, so you park your car outside the nearest coffee shop and run inside. Do you have coverage if someone steals your car and drives off—with the stereo still in the trunk—while you are paying for your coffee? What if you store the gift at home and there’s a fire that destroys not only your home, but also all the gifts you’ve purchased for family and friends?
In the case of a stolen car, your auto insurance policy is not the policy that would afford you coverage. You would need to have off-premises theft coverage on either a homeowner’s or renter’s insurance policy for that stereo to be covered. In some states the coverage is automatic, while in others you have to purchase this coverage separately. (Keep in mind that your deductible will apply in this situation.)
Similarly, if a fire starts in your home and all the gifts you purchased are destroyed before you are able to give them to your loved ones, it’s your homeowner’s or renter’s insurance policy that would cover you. The gifts are your property until you give them away.
Recipient of an expensive gift? What type of insurance do you need?
The answer depends on what type of gift it is.
For a stereo, flat screen TV, or recliner, you can probably rely on the contents/property limit on your homeowner’s or renter’s policy to give you needed protection against fire, smoke damage, vandalism, and theft (also known as “named perils”). However, you should review the limit of coverage and see if it requires an increase based on the value of the item or items and the rest of the personal property in your home.
If you want broader protection, such as coverage for if you accidently knock over the TV set or burn a hole in your new recliner with a cigar, you need a policy with all-risk coverage for your contents. All-risk provides coverage for perils not specifically excluded in a policy. If you do have to make a claim for an item that was a gift, don’t worry about having a receipt. The insurance company can estimate the value, provided you recall the make and model of the item.
Jewelry and expensive clothing are considered valuable items, and most homeowner’s or renter’s insurance policies have a specified sublimit for these items. For example, because jewelry can easily be stolen, many insurance policies have a relatively low liability limit for theft (generally around $1,500 or so). You can increase the coverage for your jewelry and other valuable items by either raising the limit of liability coverage or scheduling the items.
Raising the amount of liability coverage is the most cost effective option, but the amount you can claim for an individual item may be limited. For example, according to the Insurance Information Institute, you may only be able to claim $2,000 on an individual item when your overall limit is $5,000.
Scheduling the items by purchasing floater policies can be more expensive, but doing so generally provides broader protection. For example, if you leave an expensive item behind on vacation, the floater may protect you, whereas your homeowner’s insurance would not.
In order to purchase floater policies for your expensive gifts, you’ll need an appraisal. Typically, when you receive an expensive gift like this, the store from which the item was purchased will provide an appraisal at the time of purchase. However, if for some reason you don’t receive one, you can take the item to any jeweler or furrier after the holiday and have it independently appraised for a nominal charge.
Some insurance companies also offer a blanket valuable items rider, which can be added to your homeowner’s or renter’s policy at any time and without an appraisal. This type of coverage can be a good option if you have less valuable items that need coverage.
Electronic equipment such as a laptop, smartphone, or tablet is a fun gift to receive, but insurance companies do not have a standard way of handling coverage for these items. Some companies offer limited coverage and may exclude theft coverage, while other companies consider the items as part of your contents limit, subject to your deductible and on a named peril basis only. Still others might require you to schedule them on a floater. Find out how your insurance company views these items and what type of protection is afforded by your homeowner’s or renter’s insurance policy before you have to make a claim.
A vacation package is another gift idea that is becoming popular these days. Often, the plane tickets are for some time in the future—but life can make a mess of your travel plans. Travel insurance is a perfect way to help ensure that you can be protected in the event of a flight cancellation, lost baggage, a stolen passport or wallet, or any unforeseen medical costs while traveling. Travel insurance can even protect you in the event that you have to cancel your trip entirely.
As the holiday season draws near, take an opportunity to review your insurance coverage. Whether you’re giving the gifts or receiving them, it’s important to make sure the items are covered.
Heidi Petschauer graduated from St. John’s University in Queens, N.Y., in 1983 with a B.S. in management. She joined her late father’s firm, Petschauer Insurance, in 1982, became principal in 1995, and now shares ownership with her partner and cousin, Erwin Petschauer. She received her Certified Insurance Counselor (CIC) designation in 1997. She currently facilitates the professional and creative development of the entire Petschauer team and manages the personal lines and social media departments