Given the general state of the economy, many people are understandably trying to cut expenses any way they can. Since a significant part of anyone’s budget is their home and auto insurance, this is a natural target for trying to trim costs.
Home and auto insurance is effectively a “compulsory” coverage since either a mortgage company or state law requires you to purchase coverage. Many people are looking to reduce more “ancillary coverages” such as personal article floaters, watercraft coverage, umbrella coverage, etc. This discussion will focus on the ramifications of reducing or removing the personal articles floater.
A personal articles floater is either:
- An endorsement to a homeowner’s policy
- A stand alone policy that supplements coverage for your possessions of higher monetary value
Examples: jewelry, furs, guns, antiques, valuable collections, etc.
If you're not wearing your fur coats every day, you might want to consider storing them at the bank
Since the vast majority of homeowner’s policies severely limit the coverage and recoverable amount these kinds of items, most homeowners choose to cover these items through a personal article floater.
Personal article floaters do carry a significant cost and are not required by law therefore many questions are being asked regarding continuing to pay these premiums during harsh economic times.
Electing to delete items from your collectible schedule could save you significant dollars but make sure you understand what you are giving up.
- Mysterious disappearance (losing jewelry or a portion of the jewelry) is the most often claimed loss. This coverage is not included in a standard HO-3 Homeowner’s policy without a personal articles floater.
- Personal articles floater keep losses from applying to your deductible; without it, any loss will be subject to the deductible.
- Almost all homeowner’s policies limit coverage on certain items (jewelry, guns, furs, silver, etc.) due to theft. Without a floater, you are vulnerable significant property loss without compensation.
Are There Alternatives to the Personal Articles Floater?
While insuring these items remains the most effective and viable option the list below provides some ideas on risk reduction if one chooses not to carry a personal articles floater.
- Place jewelry items that are rarely if ever worn in a safe deposit box. The box is very safe and the bank carries coverage on the items (be sure to check with your bank regarding coverage limitations). Only insure items that are worn frequently. The cost of a safe deposit box is dramatically lower than the cost to insure the items.
- Place other small collectibles (stamps, coins, etc.) that are not used regularly in a safe deposit box for the same reasons as above.
- Review your floater schedule. Delete smaller items (choose your own personal “self insurance level” and delete items below that).
- Make sure that all items on your floater are not already fully covered by your homeowner’s policy. For example, if you own a $50k piano, more than likely your homeowners policy is sufficient to adequately cover this item. Be sure to have pictures or other records to prove you owned the item and, be careful that the items value does not eat up too much of your total contents limit under the homeowner’s policy, if it does, you may need to reconsider adding it to the floater again.
Troy Jefferson, Director of Sales
Reece & Nichols Insurance