Personal Property Sublimits
Congratulations! As part of your pursuit of the American dream, you’ve become a homeowner. Some would say that it’s not quite all that it’s cracked up to be, but maybe they never lived in an apartment complex with an excessively loud neighbor that lived above or beside them. So, you have space for yourself, your family, and all of your things, which I suppose depends largely on how many and what size things you tend to gather. You clean your house, pay your property taxes, mow your lawn, take the trash can to the curb, and maintain homeowners insurance, as any prudent homeowner would do. Aside from the annual premium figure, most policyholders focus on the dwelling replacement cost figure on their declaration page. This figure represents the amount of money the company believes it would cost to pay a contractor to rebuild your house, in the event of a total loss. Although not the focus of this message, it’s worth noting that this amount is not designed to reflect in any way the amount the local tax assessor ’s office lists nor what you or a realtor believes your property would sell for. It is a calculated number geared to pay construction costs associated with the rebuilding of your castle. That being said, let’s move on to sublimits.
In insurance jargon, coverage “A” is referred to as the aforementioned dwelling replacement coverage. Coverage “B” on your declaration page is assigned to the amount of coverage for outbuildings on your tract of land. This is typically 10% of coverage “A”. That brings us to coverage “C”, which is your personal property or contents coverage. Although it varies from state to state and insurance carrier to carrier, this figure too is typically a percentage of coverage “A” and can range from 50% to 80%. Picture if you will, a pot of money. Coverage “C” is a pot of money that’s earmarked to resolve claims for damage or loss of your personal property up to the listed limit. That brings us to the warm and tasty topic of sublimits. Although the declaration page aka “dec page” indicates the total amount of coverage available under coverage “C”, the policy language, which is written by teams of lawyers, who would also have me say that my post on this topic is neither exhaustive nor is to be fully relied upon at the time of a loss. It is your duty in the state of Georgia to read and be familiar with your product. Actual policy language will be the reference and measuring stick used to resolve any losses you may incur. By now, I’m confident that you’ve retrieved your policy and are frantically pawing through the pages to see what I’m referring to. In a nutshell, I believe it’s important that consumers understand the existence and general concept behind these sublimits. These sublimits pertain to certain groups of items, such as guns, jewelry, silverware, china, precious stones, cash, bank notes, business property, cemetery markers, gold, to name a few. More often than not, the sublimits apply only in the event of a loss by theft or mysterious disappearance. So, if the lady of the house has thing for expensive bling, it’s important to know what the sublimit is for the theft of jewelry. If she has a ring that’s appraised for $4,000 and the policy has a sublimit of $2,500 for the theft of jewelry then you can see the coverage gap and the potential dilemma. If that same house is burned to the ground, along with everything in it, then the sublimits don’t apply, but the value of the jewelry will be taken out of the overall bucket of money for coverage “C”. To close these coverage gaps, consumers are encouraged to “schedule” or individually insure items or collections of items which have sufficient value to exceed policy sublimits in the event they are stolen. Often times, the rate to schedule the $4,000 ring from our example is pennies on the dollar, which represents a much greater value, when compared to the cost of the loss of the underinsured ring, were it to be stolen. In summary, be mindful of these sublimits, as they apply to your things and talk with your agent if you’re not sure whether or not you need to schedule any items.