Brian Brandow’s wife left to go to the grocery store for a few items. She only needed to pick up a few things, so it was a quick trip. She was gone 45 minutes tops.
But when she came back, she discovered that someone had broken into their house. The thief smashed a window to get in and stole $12,000 worth of jewelry. That included her wedding ring, her engagement ring, and five of Brian’s watches.
The thief also left with cash and prescription medicine. Brian immediately filed a police report and a claim with his homeowners insurance.
But when he went to file a claim for their personal belongings, he discovered they only had a $2,500 limit for personal belongings on their homeowners insurance. That’s when Brian realized how little he knew about his own homeowners insurance policy.
Losing your belongings, whether it’s in a fire or theft, is always hard. But it’s a lot easier when you receive financial assistance to help you recover.
So can homeowners insurance cover victims of theft?
Here’s what you need to know.
Does homeowners insurance cover theft?
When you purchase a homeowners insurance policy, it comes with coverage for your house and its belongings from theft. Your personal items are protected even if they are stolen from outside of the house.
For example, if someone breaks into your car and steals your laptop, your homeowners insurance covers the item. It doesn’t matter where you parked your car either. As long as it’s parked within the country, homeowners insurance covers any stolen items from your car.
When Jeff Rose, CFP® and founder of GoodFinancialCents.com was a kid, his family went on a road trip in an RV. One night, someone robbed and stole many of their valuables. His parents filed a claim with their homeowners insurance. They were reimbursed for most of their items.
But every insurance policy has its own limits and restrictions on what it covers. For more expensive and unique pieces, like art or jewelry, you will often need an additional rider to add onto your policy. And that cash you keep in your house? Not all of that will be reimbursed. More likely than not, your homeowners insurance may only cover a part of it.
Your policy might not be as comprehensive as you think. So always double check your policy, and reach out to your agent if you have any questions.
Does homeowners insurance cover car theft?
If someone steals your car or the thief takes a part from your car, like the catalytic converter, homeowners insurance does not cover that. Your car insurance would, but only if you have comprehensive coverage.
Does homeowners insurance cover break-ins?
Dwelling coverage provides protection to your house in standard homeowners insurance policies. If an intruder breaks a window or damages your door, dwelling coverage pays for repairs.
After someone broke into their house, Brandow filed a claim for the damage done to the house by the burglar. The insurance company immediately approved the claim to repair his broken window.
That claim went smoothly, but the Brandows didn’t realize how little coverage they had for their personal belongings. They filed a claim for the missing items, only to receive a $2,500 check.that wasn’t nearly enough to replace everything.
Brian immediately decided to increase his coverage. So if the same thing happened again, his policy would cover more. After the incident, Brandow wanted to increase his coverage to $25,000 for personal items, but he knew that doing so would also raise his annual premiums.
So he shopped around and found a new insurance provider that offered $25,000 worth of coverage for the same monthly premium he was already paying.
Brandow advises everyone to go through their homeowners policy and read the fine print.
Do you have actual cash value or replacement cost value on your policy?
Homeowners insurance policies come with two options when it comes to replacing your items: actual cash value (ACV) or replacement cost value (RCV).
The replacement cost value is how much it would cost to buy a brand-new version of the stolen item.
If your Xbox system gets stolen, a policy with RCV will give you the current replacement value for a new Xbox system. It doesn’t matter if your Xbox was 10 years old and only worth $100 and a new Xbox system costs $500.
On the other hand, ACV is the item’s original cost minus any depreciation.
If your Xbox system is 10 years old and is now worth $100, that’s how much you’ll receive. ACV isn’t the options that most homeowners spring for since you’re left paying most of the money to replace your items.
When you’re choosing between policies, RCV is always more expensive to include than ACV. It’s up to you whether or not this is worth paying a premium for. But in general, RCV is the better coverage option for you.
Should you file a claim?
Filing a claim seems like a good idea, especially if you’ve had a lot of valuables stolen. But there’s a big chance that filing a claim will increase your homeowners insurance premium. Recent data suggests filing a claim can increase your monthly premium by 9 percent. In some cases, filing a theft claim led to a 13 percent rate increase.
Before filing a claim, do the math and see how much stuff you actually need to replace. If the thief stole some sentimental items that are irreplaceable, you may discover that there’s no point in claiming them and having your rates go up.
This is even more crucial if you’ve already filed a claim recently, as multiple claims could even cause a provider to cancel your policy.
Don’t file a claim automatically. Take some time to think about what you need to replace.
How to burglar-proof your home
After the break-in, Brandow and his wife installed a security system in their house, complete with motion detectors and a fire alarm. A couple years ago, they added a Ring doorbell that shows real-time video footage of anyone who rings the doorbell.
If you don’t want to purchase a traditional security system, Brandow said you should look into smart security systems. They are easy-to-install and relatively inexpensive. Plus, you can take them with you if you move into a new house.
Your homeowners insurance will likely give you a discount on your premiums if you install a security system. The amount saved will depend on your insurance provider and what type of alarm you have.
How to prepare for a break-in
You might not be able to stop a break-in from happening, but you can definitely lessen the stress of the experience.
Having the right paperwork can make the replacement process more seamless. Brandow and his wife keep receipts of valuable items in their safe to prove their value in case they’re robbed.
Rose said it’s also important to have photos proving you owned these objects. You may also decide to write down serial numbers. This can make it easier to track down stolen items that are pawned or sold on Craigslist.
“A few years ago I also had some clients go through getting their house broken into,” Rose said. “One good thing they did was taking pictures of much of their belongings. I think their insurance agent recommended they do that and they were one of the first clients I encountered that actually followed through on this advice.”
If you have antiques or heirlooms you didn’t buy and don’t have a receipt for, a professional appraisal can prove the item’s value in case it’s stolen.
You can keep the receipts in a safe or other physical location. But it’s better to scan and upload them to a cloud storage system like Dropbox or Google Drive. If the burglar takes your safe during a robbery, those receipts will also be gone.
You can also send these documents and photos to your insurance agent so they have the information on file. Documenting these items may be a tedious process, but it can save you a lot of time after a break-in.