Recently, 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!
VALUABLE 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 used to cover/replace all the things in your house that has 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 valued 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.
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.
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.
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 retail companies expecting 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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