Recently, I was reminded how important it is to have personal property insurance. One of my tenants had his car “broken into” while it was parallel parked outside the house. The robber took his new set of golf clubs worth ~$3,000. I put “broken into” in quotes because no window was smashed. He apparently left his car unlocked.
So who pays for the damage and loss if your car is broken into outside your home? Well as it turns out, it's not your auto insurance that pays, but your renter's, landlord's, or homeowner's insurance!
Personal Property Insurance
I was surprised to hear that my tenant's auto insurance wouldn't cover the theft. Consequently, I called my insurance company to ascertain what they would have covered if I had been the victim instead.
They said the loss of $3,000 worth of golf clubs would be covered under the Personal Property Insurance part of my homeowner's insurance policy. I have $273,500 in personal property insurance for some reason with a $1,000 deductible as a homeowner. In other words, I would pay $1,000 to get a check for $3,000 to replace my clubs.
Personal Property Insurance is mainly to cover/replace all the things in your house that have value in case of a theft, flood, or fire. Given I spent about $120,000 remodeling my house so far, perhaps $273,500 is in the ballpark.
But if I think further, I really don't own anything too valuable except for my electronic devices, coin collection, and several watches. And these items happen to already be covered by other policies!
In addition to the Personal Property Insurance policy, I've also got a $5,000 blanket jewelry insurance policy. This policy covers individual items with a value between $100 and $2500 that are lost, stolen, or damaged. There is no deductible under this rider and it costs a miniscule amount to include it with your homeowner's policy.
Valuable Personal Property Insurance
Here's where things get a little confusing. If you have specific valuable items you'd like to insure, then you should inquire about the VALUABLE Personal Property Insurance program.
Most people wouldn't specifically insure a set of golf clubs, because how often do they get lost or stolen? But for those of you with engagement rings and fine watches that are worth over $2,500, the Valuable PPI is what you need.
Insure Specific Valuable Items
With a VPPI, you describe each item to your insurance company and provide proof of ownership and an appraised value. An appraised value can be as easy as a purchase receipt with your name on it.
There should be zero deductible for these specific valuables. All you have to do is pay an annual premium. In my case, I pay about $248 a year for several valuable items each worth over $2,500 for a total coverage of about $17,000. As you acquire additional eligible items, you need to register them with your insurance company.
If your Valuable Personal Property Insurance rider is used and there are additional claims against something that happened in your home, that's when your Personal Property Insurance rider kicks in.
With $273,500 in Personal Property Insurance plus a Valuable Personal Property Insurance policy of $17,000, plus a $5,000 Blanket Jewelry Policy, it looks like I'm over insured by over $100,000 and therefore somewhat overpaying for Personal Property Insurance.
Insurance Is Layered
- Personal Property Insurance – Covers everything else but the itemized items in a Valuable Personal Property Insurance, and valuables worth between $100 – $2,500 under the Blanket Jewelry Policy. Things like your $10,000 Wolf range would be covered with a deductible.
- Valuable Personal Property Insurance – Covers itemized valuables worth above $2,500. Things like a $12,000 diamond engagement ring will be covered. Usually doesn't have a deductible.
- $5,000 Blanket Jewelry Policy – Covers valuables worth between $100 – $2,500. No itemization necessary. Things like a $800 platinum wedding band would be covered. Usually doesn't have a deductible.
Part of the reason why I don't like accumulating a lot of valuable stuff is because I'll then worry more about damage or loss. To worry less, I'll take out insurance, which requires money that could be used for other things, like great experiences abroad. It's so much better living on less.
Understand Your Insurance Coverage
It's important to understand your insurance coverage, especially as you accumulate more wealth. The main thing is to not have a gap in coverage. Home insurance kicks in after auto insurance. While an umbrella policy kicks in after home insurance is exhausted. The other important thing is to not pay for insurance you don't need.
Insurance policies are layered so insurance companies can charge more in premiums. Furthermore, insurance companies expect clients to lack perfect information, thereby reducing the amount of claims.
It's like how retail companies expect a certain percentage of gift card recipients to lose or forget to use their cards. Be diligent about your insurance coverage by giving them a ring to go through exactly what you're paying for.
If you don't like what you're getting for what you're paying, shop around. Your insurance check-list should include auto insurance, renters/landlord/homeowners insurance, term life insurance, an umbrella policy, short-term and long-term disability insurance, and health insurance.
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Instead of applying to individual insurance carriers one-by-one, apply for a home insurance policy on Policygenius and get multiple insurance offers. Then choose the best one that's right for you. I've met the founders at Policygenius multiple times and I truly believe they have the best insurance platform today.
Would VPP insurance cover a loss that occurred in mailing the item? Say I want to store my watch or have it appraised so I mail it to a relative (for storage or to take to the appraiser near them), would VPP insurance provide coverage if the item is lost in the mail?
Keep coming back to that first paragraph. “Parallel parked”? Like…on the street, and not on the property? Left his car unlocked? $3,000 set of golf clubs (that is very high-end, for context)? Left his clubs in the backseat, not the trunk where 99.9% of golfers put their bags that get dragged around grass, sand, concrete, asphalt, dirt for four hours each time? Does he have Renter’s insurance? Is he actually asking you, FS, to replace his set of $3,000 golf clubs? How do you feel about this, if so? Everything about this seems off, paying $1,000 to get a $3,000 check and the insurance rate increase (that will follow you around for 7 years no matter what company you switch to)?
This is astounding to me, that anyone would expect his insurance or “somebody else” to pay for this kind of negligence (at best). Just curious, is this person from the U.S.? What age? I’m curious what background this person has to be so entitled.
He blocked his own driveway by parking on the street.
Drives a luxury SUV and is in his mid-20s.
It’s his renter’s insurance that may or may not cover him, not mine.
I’m with you, Jay— Sam, doesn’t it make you a wee bit nervous to have a tenant with so little common sense?
People make mistakes all the time. No big deal. It’s about learning from your mistake that matters. Besides, it’s their renter’s insurance, their clubs, their responsibility. They just let me know.
I’ve been slowly been building up a little art collection that I haven’t insured yet. A little nervous about it. If the goons come I’m screwed. Eventually I’ll get around to it. :)
Depends on the value of the art. But if each piece is worth anything, insure it!
I’ve got this comprehensive Chinese coin collection w/ pieces that are over 2,000 years old. I’ve highlighted them in my VPP. Feel better about it!
The best way to avoid property insurance is to avoid the stuff that needs insurance… Jewelry is over-rated. Car stereos other than the standard ones that come with the car are not worth the money. Of course, a good safe is the best way to insure any household items that fit in it.
I have a ton of liability insurance. And umbrella insurance, both personal and business.
Any tips on telling your significant other to accept a ring pop instead of an engagement ring?
I’ve got this one on engagement ring buying: https://www.financialsamurai.com/the-new-rule-for-engagement-ring-buying/
No tips needed if you choose a woman who practices stealth wealth.
The comment about the CLUE report is very important. I am a broker with a top 25 brokerage and while I specialize in commercial, I refer friends to our personal lines division. One such friend was having issues with coverage when he refinanced his mortgage and his former insurance company substantially raised his rates due to the fact his mortgage was no longer with them. When his CLUE report was run he had 10 claims and he hadn’t had an accident in his entire driving career. The claims were all for calling in on his roadside assistance coverage he purchased. If he had declined that coverage and taken the savings and bought a AAA roadside policy he would’ve saved substantial money when shopping his car insurance.
I think shopping for auto insurance is vital but think one should be careful against changing companies every year. If you have a claim it’s can be much less painful if you have some history with the company. I personally look at shopping and switching every three years barring significant premium changes.
10 claims on the CLUE? Amazing. Now I should go ask what’s up.
I haven’t changed home insurance companies forever. But for auto, I will gladly.
Very good points!
Insurance ends up being such a pricey endeavor especially if it’s overdone. I’m actively looking for a way to optimize coverage across my auto, property, etc. coverage and it is indeed a complicated affair. No wonder people just sign up and forget about it!
When I was looking for a Valuables Property Insurance, I realized that it was actually difficult to find something that would really cover me all the time.
Typically for something like jewelry, some insurances wouldn’t cover if the item was damaged/lost abroad. They wouldn’t cover if it was not stolen or not reasonably protected. Eventually I found an insurance that covers worldwide and for any reason, including ‘mysterious disappearance’. The premium might be a little higher, but at least it’s aligned with how I think the insurance should work.
You’re right that it’s important to check that we have no gap in coverage, but it’s also important to understand under what conditions something would NOT be covered.
There are so many insurances, including the ones that come with credit cards, I feel like everything can somehow be covered but it’s very difficult, if not impossible, to know how to benefit from it.
YES! Check what conditions something would NOT be covered by asking various scenarios!
Just make sure the damn insurance company doesn’t make a claim based on your scenarios.
One word of caution regarding homeowner’s insurance: if you’re not sure if you have a claim or not, call your insurance broker or some other knowledgeable person, but make sure, at all costs, that your insurance company doesn’t open a claim or give you a claim number. I wouldn’t even call your insurance company until you’ve exhausted all of your other “phone-a-friend” options.
The water main blew at my house, out in the front yard. It didn’t damage any other property, but since I was a newbie, I figured I would call my insurance company and see if it was the sort of thing they would cover. It’s not. But just that one phone call with a question about whether it was covered prompted the insurance company to open a claim and assign it a claim number. It was a two minute phone call with a single question that resulted in no coverage.
Nonetheless, it got put on the CLUE (Comprehensive Loss Underwriting Exchange) database as a “claim,” even though it cost the insurance company $0. I have been paying elevated homeowner’s insurance rates ever since because I have a history of a claim now. I am so furious. I never would have called if I had known that was a possibility, and nobody warned me over the phone that this might be an issue.
Those SNEAKY devils! Sounds like bullshit actually. I would file something with the better business bureau.
Guilty until proven innocent. Here’s my story: https://www.financialsamurai.com/how-insurance-companies-and-appraisers-scam-their-customers/
Insurance can be super confusing until you take the time to ask questions and break it down. I didn’t realize there were options like the blanket jewelry policy. That’s a convenient one for small accessories.
Good to know about your renters’s claim. I would have thought that would fall under auto insurance as well. I’m paranoid about locking doors whenever I’m renting a car or driving around because the number of auto break-ins is super high in SF. At least your renter didn’t have to replace his windows. I’m sure he’ll be way more careful about always locking his doors now.
I will bet that a large majority of us have no idea exactly what all our insurance covers. Every one of us should call our insurance companies for an annual reminder. It’s like those commercials that say you thought you were getting covered for this, but you are actually getting covered for that.