What Is A Personal Property Floater?

Homeowners’ insurance policies typically cover both the dwelling and the personal property of the insured. However, some may expect their policy to fully cover all personal property at its actual cash value (or replacement cost with the appropriate endorsement), but this is not the case for certain categories of items. Expensive possessions such as jewelry, furs, and precious or semi-precious stones often have specific coverage limits.

For many insured individuals, the available coverage may be insufficient. Items like antiques or heirlooms, valued at much higher amounts, are often inadequately covered. Additionally, unless the policy is specifically endorsed, personal property is usually covered only for certain named perils. If a loss occurs that is not covered by the policy, the insurer will not provide indemnity payments.

To ensure your valuable possessions are fully protected, consider how personal property floaters can offer additional coverage for expensive belongings.

What Does Personal Property Floater Mean?

A personal property floater is a separate insurance policy designed to cover valuable items. The insured can set the coverage amount on a personal property floater to ensure that a valuable item is fully replaced if it is lost, damaged, or stolen. These floaters are commonly used to insure valuables such as jewelry, artwork, firearms, furs, silverware, and other expensive possessions.

Luxury Goods and Property Categories Covered

Here’s an example of what could happen if a luxury item covered by a typical homeowners’ policy is lost. Suppose you purchase a new watch for $8,500, and it is later stolen from your home. After accounting for depreciation, the watch is now worth $6,500, but your policy’s coverage limit is only $1,500. As a result, you would only receive $1,500 in compensation, even though the actual loss is much greater. This can lead to a significant financial setback for an unaware homeowner.

Such losses have led to the development of personal property floaters. This type of insurance is designed to cover valuable items no matter where they are located. Typical categories covered include jewelry, furs, cameras, musical instruments, silverware, golfing equipment, fine artwork, and collections of stamps and coins. These items are often scheduled in the policy.

This means that each item is individually described and assigned a value. Blanket coverage, which applies a limit to all items in a certain category, is also available for items such as cameras, golfing equipment, silverware, fine artwork, and stamp and coin collections.

Coverage Type, Limits, and Details

Silverware, as defined in a personal property floater policy, includes silver, gold, or platinum (or plated) flatware, hollowware, tea sets, and trays. Golfing equipment covers not only golf clubs, bags, and clothing but also the insured’s regular clothing stored in a locker at the golf course. Additionally, the coverage extends to golf balls lost due to fire and theft.

In some cases, you can opt for warranties to reduce the policy premium. For example, with coin or stamp collections, you might agree to keep at least 75 percent of the collection in a fireproof safe or vault with a combination lock when not in use or on display. For jewelry, you can warrant that certain items are stored in a safe deposit box in a bank vault and notify the insurer whenever you remove a piece of jewelry, paying an additional premium during that time.

If the personal property floater covers existing categories of property, any new items you acquire will be automatically covered up to a specified limit. For jewelry, furs, cameras, and musical instruments, the limit is 25 percent of the total coverage amount for each category or $10,000, whichever is less, and you must add the new items to the schedule within 30 days. For fine artwork, the limit is 25 percent of the category coverage, and you must add the items to the schedule within 90 days.

Claim Settlement

Depending on the policy form, losses are settled in one of two ways. Under the standard form, the item’s valuation is determined at the time of the loss, and the insurer will pay the lesser of the actual cash value, the cost to repair the item, the cost to replace the item with one substantially identical, or the insurance limit minus the deductible.

If the loss involves a pair or set of items, other than fine artwork, the insurer will either repair or replace the damaged item or pay the difference in actual cash value between the item’s value before and after the loss. For fine artwork, the insurer will pay the actual cash value, and the insured must surrender the remaining parts of the pair or set.

Under the agreed value form, the payment amount is established at the start of the policy. If a loss occurs, the insurer will pay the agreed value, and the insured must surrender any damaged property. If the insured wishes to keep the damaged property, they may buy it back from the insurer at the agreed price.

Conclusion

Personal property floaters are a valuable risk management tool. They offer broader coverage for the items mentioned above compared to a standard homeowners’ policy and can be tailored to cover specific categories of expensive items at a value that aligns with the insured’s actual needs.