Wait, My Homeowners Insurance Limits What?

One wooden house knickknack in a crowd of many has a bubble around it.

(Image credit: Getty Images)

When you purchase homeowners insurance, the general expectation is that you will be insured for loss or damage to your home. You know, the actual house itself, the structure. Sure, likely we also assume other things will be included in the policy, such as our lovely infinity pool, the expensive landscaping, the gazebo.

When we look at our insurance policy, we see a coverage type called personal property coverage. That certainly sounds straightforward enough, right? That’s coverage for your stuff. Your tchotchkes, furniture, clothes, computers, pictures, necklaces, the things that you will inevitably box up and schlep from house to house for your entire life. There is something you need to be aware of. Of all the items listed above, many of them have limitations on how much your homeowners insurance policy will pay in the event of a loss. Let’s touch base on a few of the more common categories.

Whether you are Thurston Howell III or Oliver Twist, chances are you have a necklace, or a ring, perhaps a watch your grandfather left for you. Jewelry and watches on most homeowners insurance policies come with a built-in limit in the neighborhood of $1,500. That is not a lot of money when it comes to jewelry or watches. Speaking of money. How much of that are you keeping hidden away between your mattresses? Hopefully not a lot if you have a claim, since the limit of cash and equivalents can be $500 or even less. Do you exercise your Second Amendment rights? Firearms and ammunition will have a limit within the policy, as well, of usually $1,000 or $2,000.

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What other limits are there?

Starting to think about what type of stuff you are holding on to? Even the more mundane personal property, such as silverware and goldware, is limited to about $2,000 on the average policy.

Have you heard of this work-from-home frenzy that has been keeping our rumps planted at home at a computer? Your employer may have provided you with a computer and a few monitors, right? (I was about to say a photocopier and fax machine, but then I realized that Michael Jackson isn’t currently on the top 10 charts, so those are a few things less to worry about.) Point being, any business property you have may be limited on your homeowners insurance policy of zero. Yes, zero. If it’s for business, don’t assume that your homeowners policy is automatically going to provide any coverage for it. Spoiler alert — consider a business insurance policy for that.

It’s safe to assume you’re carrying around a rectangular piece of glass you poke and swipe on a few hundred times a day. You guessed it — you may not have coverage for your smartphone either, especially if it’s expensive and has a fruit logo on it. How about your laptop or desktop computer? Those babies cost a real wad of cash — maybe between your phone, computer and monitors, they’re the most expensive items in your entire house! Yeah, well, you probably have only a grand or two in total of coverage for those items. Are you the Grand Poobah and play the tuba? Musical instruments have limits on them, too.

What you can do about it

Now that you’re all riled up at the audacity of insurance companies to put limits on so many things, let me explain why this occurs, how it is a good thing and what you can do to protect your special stuff.

Let’s say you and your neighbor have the same house. Model homes are common, so this isn’t something you should have to think too hard about. Same house. The difference is that you love and collect guns, your father is a jeweler, and your brother is a banker who never misses an opportunity to tell you how you need to keep plenty of cash on hand for when Armageddon comes. So yeah, your house is full of guns, jewelry and cash. On the other hand, the fella next door is a minimalist. He has solar panels (which also have a sublimit, by the way), an electric car and little stuff within the confines of his domain.

We don’t have to be a mathematician to see that these two houses represent a dramatically different exposure in the event of a loss. So how does an insurance company decide how to charge a premium for the differences in the two types of personal property kept? They could assume everyone has expensive things and all premiums would be higher, or they can put limits on items and lower the premiums for everyone.

Option two saves everyone money, and that’s the route they went. These limits work for the majority of households. Therefore, the premiums are lower to reflect that.

But what do you do with all of your stuff? The good news is that you can protect it. You can either request to have these limits increased on your policy, or you can get a scheduled items policy, or what those of us fancy insurance peeps call a personal articles floater policy to cover them.

These policies will allow you higher limits than what comes with your homeowners policy and typically will even cover them for more types of loss, such as damage or losing the item. All policies are unique, so be sure to ask questions and get what it is you need.

Knowing what your policy covers and what it doesn’t will help prevent any undue surprises in case of a loss. This list of limits within most policies isn’t by any means complete, and when you check your policy, you will find other categories that are worthy of your attention as well.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Karl Susman is a veteran insurance agency principal, nationally engaged insurance expert witness and broadcast host who translates insurance from jargon to judgment. For more than three decades, he's helped consumers, courts and policymakers navigate coverage, claims and compliance. As Principal of Susman Insurance Agency, Karl works directly with households and businesses to compare options and make clear, defensible coverage decisions.