Is Theft Covered by Homeowners Insurance?

Homeowners insurance policies offer financial protection against various risks, including damage to your dwelling and personal belongings. A common concern for many homeowners involves the security of their possessions, leading to questions about theft coverage. Generally, standard homeowners insurance policies do provide coverage for losses due to theft, though the extent and conditions of this coverage warrant a detailed understanding. This article will clarify how theft is covered under these policies, outlining common limitations, valuation methods, and the necessary steps for filing a claim.

Understanding Theft Coverage Basics

Most standard homeowners insurance forms, such as HO-3 or HO-5, include protection for personal property against theft. This coverage extends to personal property like furniture, electronics, clothing, and other household goods. The coverage typically applies to theft occurring within your home or on your property, including detached structures like sheds or garages.

Coverage often extends beyond your property boundaries, covering items stolen while away from home. For instance, if items are stolen from your car, a hotel room, or during travel, your policy may offer coverage. However, off-premises coverage usually has specific limits, often a percentage, such as 10%, of your total personal property coverage. When a theft claim is filed, a deductible will apply.

Common Coverage Limitations

While homeowners insurance generally covers theft, specific limitations and exclusions can affect the payout for certain items. Many policies impose sub-limits on particular categories of valuable personal property, meaning they will only pay up to a reduced amount for these items, even if your overall personal property limit is higher. For example, jewelry, furs, and precious stones often have theft sub-limits ($1,000-$2,500). Cash, bank notes, and gift cards typically have very low limits ($200-$500), while firearms and silverware may have sub-limits ($1,500-$2,500).

Theft coverage excludes certain situations. Theft committed by a tenant in a rented property or theft from a dwelling under construction may not be covered. Another significant exclusion is “mysterious disappearance,” where items are lost without clear evidence of theft, meaning some policies may not provide reimbursement. Policyholders can purchase additional coverage, known as scheduled personal property endorsements or floaters, for high-value items like expensive jewelry, art, or collectibles. This allows these items to be insured for their appraised value, bypassing standard sub-limits and sometimes offering broader protection, potentially without a deductible.

Valuing Stolen Property

When a theft claim is settled, insurers typically determine the payout based on one of two valuation methods: Actual Cash Value (ACV) or Replacement Cost Value (RCV). Actual Cash Value policies pay the replacement cost of a stolen item minus depreciation, accounting for its age and wear. This means the payout may be less than the cost to purchase a new, comparable item. For instance, a television bought years ago would be reimbursed at its depreciated value, not its original purchase price or the cost of a new one.

Replacement Cost Value coverage pays the amount required to replace the stolen item with a new one of similar kind and quality, without any deduction for depreciation. While RCV offers more complete reimbursement, it is an optional add-on to a standard policy and typically results in higher premiums. Under an RCV policy, insurers may initially pay the Actual Cash Value, with the remaining depreciation amount paid once the policyholder purchases the replacement item and provides proof of purchase. Maintaining detailed records like receipts, photographs, and appraisals is important to substantiate stolen property value and facilitate a fair settlement.

Filing a Theft Claim

Discovering a theft requires immediate action to initiate an insurance claim. It is important to contact law enforcement promptly to file an official police report. This report is mandatory for insurance companies to process a theft claim and aids in potential recovery of stolen items.

Once the police report is filed, policyholders should document the loss by creating a detailed inventory of all stolen items. This inventory should include descriptions, estimated values, and proof of ownership, such as receipts, photographs, or serial numbers. Next, contact your insurance company to report the theft, providing your policy number and the police report number. Cooperate with law enforcement and the assigned insurance adjuster, providing all requested documentation and answering questions to facilitate the investigation and claim review. The adjuster will assess the loss, determine coverage based on your policy terms, and eventually offer a settlement, from which your deductible will be subtracted.