By Jennifer Dantona, CIC
Most people assume that their homeowner policy will cover all of their possessions, including specialty items such as jewelry, firearms, and furs. But the truth is, even the broadest homeowner policy forms will have sublimits for these items, which restricts coverage to a certain dollar amount. While the amount of these sublimits will vary from carrier to carrier, they are a common theme in all homeowner policies.
Therefore, families with private collections that are larger than the policy’s sublimits should always consider a Personal Articles Floater (PAF). A Personal Articles Floater provides specific coverage for these types of items under a much broader policy form. The coverage is usually “all-risk” coverage with just a few common (and reasonable) exclusions, and generally without any deductible applied. The coverage is also commonly applicable on a worldwide basis, including transit. Earthquake and flood coverage are also generally included, but there are certain exceptions to this.
Other specialty items such as fine arts, sports & entertainment memorabilia and other collectibles may not have special policy limits under the homeowners, but there are still plenty of good reasons to get a separate policy for these collections. For example, clients with large collections may easily erode their personal property policy limits in a major loss and may have to choose between replacing their art collection or the everyday household goods that the homeowner policy is intended to cover. Also of note is the lack of a deductible and the relatively cheap rates to insure these types of items.
Scheduled vs. Blanket
Policyholders have two choices when purchasing a PAF – Scheduled or Blanket. If a client chooses to schedule their items, it means they provide a list of each item owned including a description and value. This information can come from either the original purchase invoice or an appraisal. Claims settlement is very simple with this option since the items and their values are predetermined. In addition, the rates tend to be cheaper since the carrier has full knowledge of the items they are insuring.
Blanket PAF policies are an alternate option for a client that does not have a detailed list of their collection available. There is no requirement to come up with a list up front, but the rates tend to be higher and loss settlement can be a little trickier since the client may have to prove the value of the items lost or damaged. In addition, blanket PAF policies will often include a “per item limit,” so consumers should make sure that nothing in their collection exceeds this limit.
Additional Options to Inquire About
Premier insurance carriers will offer some additional enhancements such as market appreciation, coverage for borrowed items, and earthquake coverage for fine arts.
- Market appreciation is available only for scheduled items and will provide for payment of up to 150% of the scheduled value if it is determined that the item had increased in value at the time of the loss.
- Coverage for borrowed items (for example-someone borrows a piece of jewelry for a special event) may also be available on a premier policy form.
- In California, earthquake coverage for fine arts, collectibles and wine collections may not always be available, or may be available only with a special deductible. Always ask your insurance professional for the best possible terms.
PAF policies are usually available from the same carrier that provides the homeowner coverage. This is always the best starting point for obtaining a new policy, and there is often a multi-policy credit available.
Stand alone coverage options are available with a variety of carriers; most famously Lloyd’s of London. Premiums, rates and coverage terms can vary greatly with these options so be sure you understand all the various restrictions and exclusions before purchasing.
Finally, appraisals are always recommended, especially for larger collections. These should be updated about every 3 years to keep up with market trends in auctions and commodity prices.
Disclaimer: The above content is a general overview which is provided for discussion purposes only and is not in any way meant as providing recommendations or legal counsel. It is not intended to apply to each circumstance. Because the facts and circumstances of every matter differ and the terms, conditions, exclusions and limitations contained in insurance policies vary, you should review your policy carefully and seek any legal counsel that may be necessary or appropriate. Momentous is not responsible for any losses or damage resulting from reliance on the information contained herein.