Let’s talk a bit about what your homeowner’s insurance covers outside of the building itself. A basic home policy will include a personal property section that can be set according to the value of the contents of the home. This amount is used to cover damages done to furniture, electronics, appliances, and other basic home furnishings in the event of a busted pipe, tornado damage, fire or smoke damage, etc. It also generally includes loss by theft coverage that is set at about $1,000 to $2,500 per occurrence; however this excludes accidental loss or damage, such as a lost or broken stone. For most people, this coverage is all that they need to ensure they do not experience a severe financial loss in the event of a break-in or fire, but for those with high value items this coverage may not be sufficient.
The enumeration of items with values above the policy limits minus the theft deductible is essential in making sure that your possessions are adequately covered. For instance, if your per-item theft limit is $1,500 with a $250 theft deductible, then any items in your home over $1,250 should be scheduled. Scheduling items means that they are appraised by a certified appraiser and added to your home policy in a rider for an additional premium, this fully insures the item against a loss, regardless of policy section limits. The premium addition is dependent on your state, but the average is at or below 1% of the appraisal value per year (though it can be as high as 4% in some states). As with any policy endorsement, discuss it with your agent to make sure the coverage is needed before adding the coverage. Frequently scheduled items include jewelry, musical instruments, furs, coin collections, and art.
Another benefit of scheduling high value items is that they will be covered for their full appraised value. This differs from the basic property section of your homeowner’s policy in the way it pays for lost and damaged items. The property section has two options for reimbursement: replacement value and actual cash value. The first option pays you the amount needed to replace the item exactly or with a functionally equivalent item; this is generally the more expensive option. The later pays out the initial cost of the item minus the depreciation. Depreciation is item-specific and is a function of the item’s age and value retention. For scheduled items, the amount paid by your insurance for a loss is exactly the value of the appraisal minus the deductible. The coverage amount can also be changed year after year with new appraisals, this accounts for items that increase in value with age.