Knowing Your Home Insurance Policy’s Special Limits

Knowing Your Home Insurance Policy’s Special Limits

Out of all the insured homes in the U.S., two-thirds are underinsured. While some homeowners know they’re underinsured, others do not. Undervaluing a home’s contents and failure to increase coverage after purchasing an expensive item or completing a major home improvement project contribute to homeowner’s underinsurance. Additionally, the special limits that insurers usually put on homeowners insurance policies can lead to underinsurance. For this reason, you should know your policy’s special limits. Here’s some more information on this topic.

What Is a Special Limit?

As the name implies, a special limit is a clause that caps/limits the amount of compensation you can receive from your insurer in the event a covered peril damages certain items in your home. For instance, your insurer may put a special limit on your home business. This means that in case a covered peril destroys your home business and you file a home insurance claim, your insurer will only cover a portion of the loss. Special limits of liability apply to certain categories of items, including, among others:

  • High-value Items

  • Most standard homeowners insurance policies do not provide enough coverage for high-value items such as jewelry, art, collectibles, and antiques. That said, if you have such items in your home, take note that the insurance company will not pay the full amount in case they get damaged following a covered peril. In case you own a high-value home with many expensive items, be sure to purchase a high-value home insurance policy instead of the standard policy because adding endorsements won’t guarantee you full coverage.

  • Firearms

  • Per the Insurance Journal, most insurance providers treat firearms as part of your personal property. This means that in case someone steals your firearm, your insurer will likely cover the loss. However, your payout will depend on your insurer, your coverage limit, and the special limits on the policy.

  • Lifestyle Items

  • Depending on your coverage limit, your insurer will impose small limits on different items to ensure that most of your belongings are covered to some extent. Typically, lifestyle items such as sports equipment, phones, bicycles, gaming consoles, and other electronics usually have special limits.

  • Home-based Business

  • If you run a business from home, your standard homeowners’ insurance policy will not cover your business fully, says the Small Business Administration (SBA). According to the Insurance Information Institute (III), standard home insurance policies typically have coverage limits of $2,500 and $250 for business equipment stored at home and off-premises, respectively. To protect your business adequately, you can either add a rider/endorsement to your standard home insurance policy or purchase a standalone in-home business insurance policy.

  • Cash

  • Your homeowners’ insurance policy will also cover, up to a certain limit, theft of cash in the form of coins, banknotes, stored-value cards, bills, smart cards, and some precious metals. If you need more coverage, you can either increase your coverage limit or add a rider to your policy.

  • Watercraft

  • These include, among others, boats, outboard engines, motors, equipment, and furnishings. If you own any of these, consider purchasing a standalone watercraft insurance policy for full coverage.

Almost all standard homeowners insurance policies have special limits on certain items, including the items discussed in this article. To avoid underinsurance, identify the special limits on your homeowners’ policy and then purchase the necessary supplemental policies or endorsements to fill the coverage gaps. To get a homeowners insurance policy that suits your unique needs, contact our experts at Spotlight Insurance Agency today.