10 Special Limits in Home Insurance You Need to Know About

Getting shortchanged on your insurance? It may be because of special limits.

Young Woman and Grandman look at Home Insurance Coverage for heft of Cash on Tablet
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We have all heard about the limits on jewelry on an insurance policy, but there are many other limits hidden in your insurance policy wording that you might want to learn about before you have a claim and you risk losing thousands of dollars.

Many people leave an insurance claim feeling shortchanged, but this can be avoided by understanding what to expect in advance. One of the important misconceptions that cause people to feel unhappy with a claims payout is when they think they will be paid for something, but then don't get paid fully. The reason is often not knowing the limits of insurance.

By learning about what the special limits are and how they can affect you, you can make better decisions on whether you need an endorsement to be added, or if you need to find a better insurance policy for your needs.

What is a special limit of liability on insurance?

A special limit of liability on your insurance policy is a limitation within your policy wording that states how much the maximum will be paid for certain predefined items. It is not to be confused with the contents and personal property limit on your insurance policy declaration page or the insured value of the dwelling which is always much higher.

Special limit example: Your insurance policy has a limit for cash or money

Here's an example of the special limits on your insurance policy and how it can impact a claim:

Mary's grandma was robbed, and the thieves not only took all her jewelry and silverware but also made off with $1,500 in cash that her grandma was saving under her mattress for a rainy day.

When her grandma made the insurance claim, she provided all the proof needed that she had $1,500 hidden under the mattress; gathered her jewelry evaluations which totaled $16,000; and provided the silverware details which added up to $6,000. She provided it to her claims adjuster for her proof of loss form and inventory and felt confident that she would get paid the $23,500 since this was her actual loss.

Mary's Grandma claimed $23,500 for the theft, but the insurance company only paid her $4,200! What happened?

Despite all the meticulous paperwork and proof of the value of the items that were stolen, Mary's grandma only got $200 for the cash, $2,500 for the silverware and $1,500 for jewelry: a total of $4,200. The reason she only got this amount is because these were the maximum amounts payable as outlined in the small print of the "Special Limits of Liability" on her insurance contract. There was no wrongdoing, only a very costly misunderstanding of what the insurance covered. 

Why you might not get fully paid for theft of cash and other items on your insurance

Due to the special limits of insurance on money and the fact that Mary's Grandma had not scheduled the jewelry and silverware on a rider or special endorsement, Mary's grandma was now out of pocket thousands of dollars due to the difference between the value that was stolen, and the maximum payable due to the special limits.

The insurance company will only pay up to the special limits in the contract

The family was upset because they felt shortchanged and scammed by the insurance, but the details were all in the special limits. Mary's grandma didn't do anything wrong, and she had all the information to prove how much she lost. It just didn't matter. The insurance company would have never paid those amounts because they policy they bought did not cover it. The insurance company will only pay what they have agreed to pay within the contract.

This could have all been solved in advance had they checked out the special limits of insurance when they bought the policy or reviewed the details on renewal with their insurance representative to find out about adding insurance riders or getting enhanced coverage on a better policy form.

"Special Limits of Liability" cap how much money you can get paid in a claim

Whether you have a Renters Insurance, Home Insurance or Condo Insurance policy, there are always limits hidden within the policy wording that will limit how much money you get paid in a claim. Many people look at the insured dwelling amount, or the personal property amount of insurance and consider the amount listed on the declaration page as the total amount they will get paid in a claim, but this is a huge misconception. Every policy has special policy limits and the time most people realize it is during a claim.

Why are there special limits on certain items on home insurance policies?

Providing special limits on insurance policies ensure that the cost of insurance remains affordable for the general public.

Special limits usually limit items to a value that the "average" person would have so that there is a fair amount of coverage provided, but this is related to each person's lifestyle. 

It is also important to remember that special limits on certain items were originally structured at a time when lifestyles were different and values were different, and although some of the limits are updated, they do not take into account today's lifestyles, especially in the areas of technology people who are freelancers or self-employed.

A good example of an outdated policy limit might be a policy that is limiting maximum cash payable to $200 or $500. A person doesn't need to be rich to have a few hundred dollars in cash, imagine if you apply this to a household with a few people living in it. Clearly, the limit may not be sufficient. For the most part, it presumes people are using banks to store "large amounts of money" — the question is how much is a large amount of money? Insurance policies are structured to address the average needs.

If you are out of that average assumption, then you need to review your limits.

To understand this better, let's take a look at a basic list of some of the special limits found in standard insurance policies.

Where do you find the special limits on your insurance policy?

Before we go over what the special limits are, it may help to know where you can find them on your own policy. Using the example of an HO-3 policy from the Insurance Institute, under the Heading "Coverage C: Personal Property". Your home, condo or renters insurance policy will follow a similar format and will contain your special limits in the same section. 

Every insurance company is different. Some companies offer ways to get higher special limits, by offering upscale policy forms or endorsements. This information can be used as a guide to discuss your concerns with your insurance representative who can review the specific special limits of liability in your policy, or may be able to offer you a better policy with higher limits.

10 Common Special Limits on Your Insurance You Should Be Aware Of

Here is a list of the common special limits of insurance payable in a claim on specific items within your insurance policy. This is just a sampling of the basic limits; your policy contains more than these items within the limits and exclusions. This will give you the general idea of what to look out for. Because the limits vary from company to company, the amounts of limitation are not listed. 

Every company is different, these kinds of limitations may be significant if you have these items. Be sure and inquire about whether they are covered, how they are defined and limited:

  1. Cash, Money, bank notes, coins, precious metals like gold and silver as well as stored value cards and smart cards
  2. Securities, accounts, deeds, evidence of debt, letters of credit, notes, manuscripts, personal records, passports, tickets, and stamps 
  3. Watercraft (subject to additional limitations in policy wording) including their trailers, furnishings, equipment and outboard engines or motors
  4. Trailers or semitrailers not used with watercraft 
  5. There is a limit on the maximum amount payable for jewelry, watches, furs, precious and semi-precious stones when lost by theft. This is probably the most commonly known limitation since people still invest in expensive watches and jewelry, the most common item being the wedding ring. Some insurance companies even offer insurance specifically for wedding rings when their values are very high in comparison with contents amounts. For example, although it is feasible that someone has a $50,000 renters policy and a $25,000 ring, it doesn't always make a lot of sense to the insurance company underwriters to insure a ring valued at half the value of a person's entire list of personal possessions. There are options available in these cases to buy separate insurance or a rider with high-value insurance companies or even jewelry specialized insurers. 
  1. Silver, gold, and platinum-ware or plated-ware when lost by theft. Although these items are not as popular as they once were in the general population, many people have items they have inherited, and consideration should be given to these items when you think about what you need to insure.
  2. Firearms and related equipment when lost by theft
  3. For property primarily used for business, this coverage usually has two limits, one of which is "On premises" and then the other which is "off premises." The limit varies greatly but may be as low as $500 off premises. If this applies to you, you will not only want to inquire about the special limit but may also be concerned with the exclusion in the policy which does not cover you for a home-based business. Running a business from your home, even a small one, may make your insurance null and void if you haven't declared it, depending on the insurance company policy on home-based businesses. Make sure and discuss this with your insurance if you have any income based on working from home. It's important because it not only is limited in the property but also in your personal liability coverage.  
  1. Beware of low limits on these lifestyle items  Bicycles and sporting equipment, Mobile Devices — phones, tablets, etc. As well as Computers, Gaming Devices, Electronic devices and related software
  2. Fine Arts, Collectibles, and collections. These items may not appear in the Special Limits of Insurance section but may be excluded or limited to other parts of the wording. If you have any kinds of antiques, fine arts or collections of any kind, speak to your insurance about what the basis of claims settlement will be and find out if coverage is limited or excluded. There are policies structured to better cover people with these items, so it is important to discuss if you have any of these to find out your options.

    Is the special limit like the deductible in a claim?

    These limits are not to be confused with deductibles; the deductible will apply to these items in a claim unless specified otherwise in your specific insurance policy. 

    Do all insurance policies have special limitations on contents or personal property?

    Yes, all insurance companies contain clauses in the wording that limit amounts payable for certain items. However, although all companies have special limits, they are not all the same. One company may offer higher special limits. Other companies may offer various options to choose from so that if a client doesn't need higher special limits, they can choose a cheaper policy. 

    Discussing Special Limits on Your Insurance Policy Can Save You Money

    Taking the time to review your special limits can save you thousands of dollars in the cost you pay on your insurance annually, as well as how much you get paid for a claim:

    • Maybe you have none of these special limit items, so it allows you to take a more basic policy;
    • Maybe you need more insurance because these special limits concern you. Only you can determine this after a discussion with your insurance representative. 

    Don't pay for insurance you don't need, and don't cut corners to save money on insurance by not insuring the things that are important to you.

    Mary's grandma would have been fully compensated in her claim if she had taken the time to add riders or endorsements. She may have even done better by choosing a high-value policy instead of the basic home policy which did not cover her at all when she finally needed to make that claim.