Guide to Specialty Homeowners Insurance

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You think you have enough homeowners insurance coverage to rebuild your home if it is destroyed or damaged by a fire, lightning strike or other natural disaster. You might even think you have enough to replace the possessions inside your home should they be damaged, destroyed or stolen.

But do you really? You might not if you own fine art, expensive jewelry, fur coats or expensive boats or motorcycles. To protect yourself financially, you might have to buy specialty coverage in addition to your standard homeowners’ coverage.

And, yes, this extra coverage will cost you more money. But it can also be a financial safety net. What if a fire destroys that expensive painting or a thief steals your entire collection of antique jewelry? Your standard homeowners’ policy probably won’t pay out enough to cover your loss.

Specialty insurance, though you’ll have to pay extra for it, will.

Anthony Tornatore, director of insurance product management at Chicago-based insurance provider Kin, said that homeowners should purchase specialty coverage as soon as they buy anything of high value. This includes everything from musical instruments to art, jewelry and furs.

"Most standard homeowners' insurance doesn't cover these specialty items," Tornatore says. "To make sure those items are protected, homeowners should opt for scheduled personal property coverage."

Make a list of expensive items in your home

You might not be familiar with this type of specialty insurance coverage. Basically, if you want to cover these more expensive items, your insurance agent will include line item in your homeowners' policy to cover the valuable you're trying to protect. This line item is known as an endorsement.

Say you have a rare and valuable painting in your home. Instead of trying to protect that painting with your standard homeowners' insurance policy, you would specifically mention the art in a line item, stating how much coverage you want for that particular piece.

If you don’t do this, your policy might leave you short of enough dollars to cover your loss. A standard homeowners' policy provides a set dollar limit for your possessions. That limit might not be nearly enough to cover the loss of your rare or expensive items. That's why listing your most valuable personal property and giving these items their own coverage limits is a smart move.

You will have to pay extra for these endorsements. But this isn't surprising: You are getting extra coverage in addition to that provided by your standard homeowners' insurance policy. Insurers will charge you more for this extra protection.

Stefan Tirschler, product and underwriting manager with Square One Insurance Services in Vancouver, British Columbia, said that standard insurance policies always contain limits on certain specialty property, items such as jewelry, bicycles or fine art.

In some cases, the limits are acceptable, Tirschler says.

"If you don't own any bicycles, then you don't need coverage for them," he says.

Common items not covered by homeowners insurance

In other cases, a policy might not cover certain valuables at all. For example, motorcycles, ATVs and other motorized vehicles are usually not covered by home insurance, Tirschler said. To cover these items — to protect you, for example, if they are destroyed in a garage fire  you’d need to take out a separate policy, a type of specialty insurance.

"If the basic limits included in your home insurance policy are not enough to cover all of the specialty property you own, then you should look into additional coverage," Tirschler says.

Tirschler recommends that owners first check with the provider of their homeowners' insurance to discover what coverage limits are already included in their policies. Owners can then determine how much more they need to be fully protected.

For property that is easy to replace, owners will want enough coverage to replace a destroyed, damaged or stolen item with a new version, at whatever price that new version might cost. Tirschler says that you should always remember to insure specialty property to its full replacement cost, plus applicable taxes, even if you got that item on sale.

"There's no guarantee that a similar sale will be available at the time of your claim, so you don't want to accidentally fall short," he says.

For items that aren't as easy to replace, such as fine art, you'll need an independent appraisal to determine how much they are worth.

Ajay Anand, chief executive officer of New York City-based Rare Carat, a provider of diamond engagement ring advice, said that homeowners should always have their most valuable items appraised to determine their true worth, which will help them determine how much specialty insurance coverage they need for them.

And they should always keep the receipt, Anand adds.

How much should you spend on this additional coverage? Anand says that if you are buying specialty insurance to cover a diamond ring, either in the form of an addition to your existing homeowners' policy or as a separate policy, you should never spend more than 1 percent to 2 percent of the item's value to insure it.