Personal Floaters and the Home Insurance Policy

shutterstock_146764052The standard home insurance policy as it’s designed performs very well in protecting the assets of the average homeowner. The policy provides coverage for the dwelling and also the personal property of the residents. Additionally, home insurance policies offer personal liability coverage for protection from third-party claims and lawsuits.

However, because it is a standardized form utilized by the majority of homeowners, the policy will sometimes fail to properly insure risks that are somewhat unique. Nowhere is this more apparent than with unusual or high-value personal possessions that have limited, if any, coverage on the standard home insurance policy. Thankfully, the insurance industry has created personal floater policies to address the problem.

Limitations of Home Insurance for Unique and Valuable Items

In the typical home insurance policy, the dwelling and most of the contents are covered up to the amount specified on the policy. The only limit on items such as furniture and appliances is the total limit insured on the policy with no separate cap on the value of each individual item. Unfortunately, there are a number of other items that have very low limit caps on the amount recoverable from the policy. As an example, the following items usually are limited in the coverage available:

  • Money, coins, and medals, including that are part of a collection – limited to $200 in any one loss
  • Securities, checks, cashier’s check, travelers checks, money orders, and other negotiable instruments, manuscripts, and passports – limited to $1,000 in any one loss
  • Stamps, trading cards, and comic books, including any that are part of a collection – limited to $2,500 in any one loss
  • Firearms – limited to $2,500 in any one loss due to theft
  • Silverware and goldware – limited to $2,500 in any one loss due to theft
  • Electronic data processing equipment – limited to $5,000 in any one loss

The limits may sometimes vary from insurer to insurer, but these items are commonly covered with low sublimits, if covered at all. Many policies completely exclude jewelry and furs, while others may offer a small limit, such as $500 for the loss of any such items. Artwork and rugs are also commonly covered at lower levels than their full value if they are items of any significant cost.

All of the above items can generally be covered on a floater policy that is purchased separately from the home insurance policy. The floater is given its name due to the nature of the items covered, as they are not permanently affixed and may very easily be moved from one location to another. Even though other items in your home may meet this definition, the home insurance policy only shifts items of particular value to the floater policy for appropriate coverage.

Securing Floater Coverage

Most items that are not easily or appropriately insured on the standard home insurance policy can be insured on a floater. Different insurers will offer different types coverage, and often, multiple floaters will be necessary to cover varying items. If you have both valuable artwork and jewelry, you will likely need dedicated floaters for each category of items insured.

It’s unusual to have one floater policy cover very different types of property. When purchasing a floater policy, it’s a good idea to check around, as your standard home insurance company may not always be the best option. Unlike the standard policies (home insurance, personal umbrella, and personal auto), floaters are often unique to the property covered and there are sometimes very limited options for securing coverage. The more unusual your property, the more challenging it will be to find a good policy.

One of the benefits of floater policies is their superior coverage terms when compared to the standard home insurance policy. In many instances, floaters will cover property without any deductibles, and can offer better pricing than the standard home insurance policy. However, terms are less standardized with floaters, so it’s important to fully understand what you are purchasing before securing a policy.

Things to Consider from Your Floater

Some policies provide a blanket limit, which is the most the insurance company will pay in any one loss. Other policies will specify an amount for each and every item being insured. There are advantages and disadvantages to either option, but the decision will come down to cost and risk tolerance. If you want to insure at the lowest price, you will likely have to accept a lower blanket limit and hope that you don’t lose everything in one incident. If you are seeking the maximum coverage, a defined limit per item is the way to go, but will cost much more in premium. A hybrid approach is to have particularly high value items insured for a specific amount with the remaining items falling into a blanket limit.

When setting up your policy, you want to know exactly how you will be paid in the event of a claim. With most high value items, it’s common to have an appraisal of the insured items to pre-determine their value. With the agreed upon amounts scheduled onto your policy, there will be no dispute at the time of the loss. However, you should pay attention to any significant appreciation of your property, as you will need to update your policy with the newer, higher values.

The very nature of items insured by a floater policy presumes they can easily be moved from location to location and, therefore, the policy generally does not set such limitations on coverage. Ideally, policies with worldwide coverage are the best, as you need not worry if your jewelry is lost or stolen while on vacation overseas. Worldwide coverage is not always automatic, so you should inquire prior to purchasing a policy.

Even though your items may be insured on a floater policy, your insurance company would prefer that you not lose them in the first place. Many companies will offer loss control services to help you protect your property. They can offer suggestions and advice on how best to secure your valuable property to prevent loss or damage. These services are generally free of charge and are included in your premium. In some cases, the policy may actually place certain requirements on you to remain insured, such as storing your jewelry in a safe when they are not being worn.

Purchasing a Floater

The cost of a floater policy depends on several factors, primarily the value being insured and the nature of the property being insured. Items that are susceptible to damage or loss can be more expensive to insure. Most companies offering floater policies have established pricing based on their historical experience with loss of the type of items insured and will offer you a premium based on their assumptions. The more unusual your item, the more likely you will pay a higher premium, as insurers have less experience. As with other insurance policies,

If you find that your regular home insurance company can offer a floater policy, you might enjoy a multi-policy discount. Even if you go to a different company for your floater policy, you might still end up with a multi-policy discount if you purchase more than one policy for your many different insurable items.

The first step in purchasing a policy is to check with your current insurance company to see if they offer floaters. If they do, they can help you effectively separate out the values that would otherwise be on your home insurance policy, eliminating any double charges for the same items. If you need to find another insurance company, checking with independent insurance agents can open up the possibilities to more insurers.

For certain items, special interest groups or clubs may be of assistance. You may be surprised to find that there are Internet groups and forums devoted to just about any type of collectible items. These groups are often great sources of information for insurance to cover their specific hobby. Sometimes the manufacturer or retailer of certain products may also offer suggestions or even an insurance program already designed to insure your items. After all, it’s likely that you are not the first person to try and insure your item.

If you have anything that is of particular value, it’s always a good idea to check on the possibility of insuring it with a personal floater. The worst thing to do is to rely on the home insurance policy for insurance coverage on unusual or high-value property. Personal floaters can usually do the job better and cheaper.

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