Coverage C, Unscheduled personal property:
Covers personal property that is owned and used by the policyholder. Property does not have to be located at residence, but property located at a secondary residence is not covered. Multiple exclusions apply including but not limited to property rented to other individuals, automobiles, sound equipment in an automobile and animals.
In addition to a number of exclusions, dollar limits and sublimits also exist. Sublimits (dollar limits on indemnity paid) generally apply to items with excessive value like jewelry, art, collectibles, expensive clothes, etc. These sublimits are typically very low if you do possess such items, but the purpose is to maintain reasonable premium costs for the average homeowner. Coverage of these items can be increased in two ways: by either raising homeowner coverage as a whole or by adding protection through floater policies. While both ways are feasible, for items of excessive value it is advisable to use a floater policy to ensure full coverage. It is recommended to create an itemized inventory of the items in your home and base your decision for coverage on this list. Additional explanation of floater policies is provided below.
When attempting to recover damages for items from your insurance company most will require some sort of proof of ownership and estimated value (including depreciation) for the property in question. An inventory of personal property is a must have and should be kept in a secure location (i.e. safety deposit box) in case fire or some other event that destroys the residence. A room-by-room video or an itemized list of some sort are a couple of ideas.
Coverage C is trickier than other property coverage under A and B. Be sure that you fully understand your policy, its requirements, inclusions and exclusions. Seek clarification on anything you do not fully understand.
Applicable provisions:
Floater policies:
As mentioned above, sublimits (dollar limits on indemnity paid) apply to items of excessive value like furs, jewelry, firearms, collectibles etc. A personal article policy only provides protection for items named on the policy while a personal property floater covers all items. Under HO3, coverage for personal property is actual cash value replacement (factors in depreciation) and is limited to 50% of dwelling coverage, but the option to raise this limit is available.
Market value:
In basic policies personal property is replaced at actual cash value, which factors in depreciation. In addition to requiring record keeping, indemnity received is often significantly less than what it will cost to replace the item. This stipulation does not apply to the HO-5 policy which automatically includes like-kind replacement (i.e. does not factor in depreciation).
Guaranteed replacement cost:
For a higher premium a guaranteed replacement cost option also exists that allows the insured to receive full replacement value even if it exceeds the policy limit. Though the previous sentence is in reference to structures, personal property (coverage C) also benefits from guaranteed replacement cost as policyholders will receive replacement cost for losses as opposed to actual cash value which is typically less due to depreciation. Some limitations and rules apply to the guaranteed replacement cost option. For example, sometimes percentage limits exist on the maximum replacement value (i.e. 150% of policy limit) and dwelling coverage must equal 100% of full replacement cost, rising as the value of the home rises. HO-5 policies automatically include guaranteed replacement cost for coverage A (dwelling, attached structures), B (other structures), and C (personal property). Keep in mind that despite the “guaranteed replacement cost” provision, policy limits (maximum caps on indemnity paid) exist. Sometimes instead of guaranteed replacement cost companies offer extended replacement cost in order to protect themselves. Be sure you fully understand your particular policy.
Inflation guard endorsement:
An inflation guard endorsement can be added to ensure that insurance coverage keeps pace with the increasing value of the home and adequate insurance is maintained. This will help provide protection against falling below the 80% threshold and receiving less than full replacement value. Note that inflation guard can also be purchased for floater policies in order to keep pace with items that increase in value (e.g. collectibles).
