Insuring holiday gifts: Are you covered?
You’ve made your list, checked it twice and gone shopping. But you should also make sure your gifts are covered — with more than just wrapping paper.
The good news is many holiday gifts will be covered under your standard home or renters insurance policy, even if they’re stolen from your car or, say, the food court in the mall, says Brian Rauber, a Farmers insurance agent in Missouri.
Of course, you have to factor in your deductible. So, if you have a $500 deductible and that $275 coffee grinder you bought your mother-in-law gets stolen, you’ll pay out-of-pocket to replace it. But if it’s the $4,000 road bike you bought for your husband, you should be able to file a claim and get a check.
However, standard policies typically have coverage caps on certain types of valuable items, so it pays to think ahead if you’re buying a pricy present.
The most common mistake policyholders make with Christmas presents? “Assuming they’re covered, regardless of value,” Rauber says.
When do you need extra insurance for a gift?
If you’re thinking about extra coverage for a gift, consider two factors: the type of item and the cost.
Because most home and renters policies cap coverage on certain types of valuables, you might need extra coverage if you’re buying a gift that fits into one of these categories and is worth more than the amount of the cap, says Chris Hackett, director of personal lines policy for the Property Casualty Insurers Association of America.
Why do insurers put caps on categories? “It’s a way to keep insurance affordable,” Hackett says.
Every policy is different, so check yours, but coverage commonly is capped on art, cameras, jewelry, furs, firearms, musical instruments, collections and even rare books. For instance, a typical cap for jewelry is about $1,500, according to the Insurance Information Institute.
Other types of expensive gifts, like new furniture or stereo equipment, might not be capped in your policy, but it’s always best to check, Hackett says.
If you bought, say, a diamond necklace that’s worth more than the cap in your policy, you have three main options:
- Boost your valuable item coverage. Many insurers offer you the option of buying a rider — an add-on to your policy — that offers extra “blanket” coverage for valuable items. For example, The Hanover Insurance Group allows you to get up to $50,000 coverage for jewelry or another chosen category. If you go this route, your home deductible usually applies, says Troy Thompson, principal at Pinnacle Insurance Agency of Minnesota.
- Get a rider for the item. Or, you can “schedule” an item on your home insurance, meaning you get it appraised and add coverage to your policy specifically for that item, Hackett says. One big benefit: There’s typically no deductible if you insure the gift this way, Thompson says.
- Get standalone coverage. No home or renters insurance? You can get a separate policy that might cost a few bucks more per month — say, $12 rather than $10 — than insuring the item as part of another policy, Thompson says. “It might be just a touch more expensive,” he says.
5 holiday gift insurance tips
To increase your chances of a happy holiday, here are five steps to make sure your gifts are properly insured:
- Call before you buy. If you have home or renters insurance, give your agent or insurer a jingle as soon as you find the perfect present, Hackett says. Ask if you need extra coverage, he says.
- Get an appraisal right away. If you’re “scheduling” that item on your home insurance, you’ll need an appraisal. See if you can get it appraised before you make the purchase, so you can have your insurance in place before you leave the store, Hackett says.
- Use plastic for your purchase. If possible, make the purchase with a credit card that offers purchase protection, a type of insurance that will fix or replace an item that’s damaged or stolen within a certain timeframe after purchase, usually 90 days. Check with your credit card company to see if it’s offered and get the specifics, including coverage limits and exclusions. Having extra coverage can’t hurt, Hackett says.
- Mailing a gift? Get insurance. Are you sending a fancy new phone or music player to your grandkid across the country? Make sure you insure the parcel through the U.S. Postal Service, or other carrier, such as UPS or FedEx, Hackett says. Your home insurance might not cover items in transit — and there have been recent news stories about thieves swiping packages off porches, Thompson says.
- Remind the recipient to get coverage. The buyer of a gift should make sure the item is covered before presenting it, according to Allstate. But once the item changes hands, the onus is on the new owner to get the item covered. While you might have a little leeway in timing, it’s best to make the change sooner than later, Thompson says.
So, this season, take a few minutes out from baking cookies or jamming to carols to see if you need extra coverage for your gifts. “It’s better to be safe than sorry,” Thompson says.