Homeowner's insurance provides a certain sense of security. But for a lot of consumers with valuable possessions, that security may be an illusion: Many policies exclude certain items or place limits on coverage of others.
To fill in those gaps, experts say, consumers should consider purchasing a rider, an attachment to a policy that alters its coverage and terms.
4 reasons to purchase a home insurance rider
Here are four reasons that homeowners should consider a policy rider, according to Jim Swegle, vice president of product management at Safeco Insurance:
- "Sublimits" often appear in homeowner's policies. “The one that’s most common is on jewelry, so you might have a limit of $2,500 or $5,000 for all your jewelry,” Swegle says. If your jewelry is worth more than that, you need a rider.
- Most homeowner's policies cover a few "perils," which are categories of loss, such as theft, fire and wind damage. However, most policies don’t cover accidental loss. A rider can be designated to cover all types of loss, so you’d be covered, for example, if you dropped your wedding ring down the drain.
- If your home insurance coverage isn’t adequate enough to replace all of the items in your home in the case of a total loss, a rider provides coverage over and above that amount.
- For those who have a homeowner's insurance policy with a high deductible, a rider may be purchased for special items. A rider typically has a low deductible. Swegle gives this example: You own a pricey bicycle, but you have a $2,500 deductible on your homeowner's insurance policy. So you buy purchase a rider for the bike. The rider's deductible is $50, and the rider costs $30 a year. “No matter what happens to the bike, it’s covered," Swegle says.
Assess your needs
When buying or renewing a homeowner's policy, it’s important to ask two questions, according to Hyancith Tucker, owner of Tucker Insurance Agency in Crofton, Md.:
1. What am I covered for?
2. What am I not covered for?
The answer to the second question will help you determine whether you’re a good candidate for a rider. A list of sublimits can be found in the contents section of your homeowner's policy, says Swegle, the Safeco executive.
Your main consideration shouldn’t be what you own, but rather what it’s worth. For example, every person who owns jewelry or artwork isn’t a candidate for a rider. The decision about buying a rider rests with how valuable those possessions are or how many of those possessions you have.
Should you determine you need a rider, your insurance company may require that your valuables be appraised.
“If you have a Picasso, we want to know that it’s a real one and how much you paid for it,” says Tucker, the Maryland insurance agent.
Likewise, appraisals may be ordered again over time to make sure the policy covers any increases in value. For example, “in inflationary times, gold starts going up as a hedge against inflation and that has a huge impact on jewelry replacement costs,” Swegle says.
Remember that it's important to update a rider if you add belongings, such as more jewelry or artwork.
Likewise, if you downsize, you may find that your rider is no longer necessary. That’s what happened when 38-year-old Latrice Wilson of Brunswick, Ga., divorced her husband. The couple had a rider to cover her husband’s expensive watches, but “the amount of jewelry I owned was covered by the general homeowner’s policy,” Wilson says. Therefore, she wound up not having to buy a rider for her jewelry.
Many people review their insurance policies -- including the need for riders -- during renewal season, but “I wouldn’t wait for it to come up for renewal to address these issues,” says Michael Barry, a spokesman for the Insurance Information Institute. As soon as you suspect a purchase may exceed your policy’s sublimits, contact your insurance provider.
“If you’ve got a $10,000 engagement ring and you don’t have a rider, you’re under-insured, almost certainly,” Barry says.
Pay attention to details
While the most common items covered by riders include jewelry, artwork and furs, a rider typically can be purchased for anything if the insurer is willing to underwrite it. Safeco has riders for such items as false eyes and hearing aids, Swegle says. Other items that may benefit from a rider include musical instruments and big-ticket computer equipment.
It’s important to read the fine print when buying a rider. For example, all riders don’t cover accidental loss, so you'll want to ask your insurance agent about that, Tucker says.
Also ask exactly what you'll receive from a claim in case of a loss. Many people would assume that if you have a rider for jewelry and you lose an earring, you’ll be able to replace the pair. But in some cases, you'll be covered only for the loss of one earring, not the pair, "because that’s what you lost,” Tucker says.
The cost of riders shouldn’t be much of a deterrent, as they typically $8 to $40 a year. For the added protection, that may be worth the price.
“The homeowner's insurance policy is concerned with the big picture things -- rebuilding the house and restocking the house,” says Barry, the Insurance Information Institute spokesman. “Riders provide that broader coverage.”