As companies gear up special sales and inventory for Black Friday, shoppers should understand the ability (and limits) of their home and renters insurance.
Whether you’re buying a Christmas gift for a loved one or treating yourself to some nifty electronics, you may have more coverage for your new holiday buys than you think. Home and renters insurance also gives you a number of ways to enhance your policy to better protect electronic appliances and expensive valuables. But you should be aware of the limits to your policy.
Read our guide to what home insurance covers.
Here are three insurance tips to reflect your Black Friday buys.
Check your off-premises coverage limits
Did you know that if somebody breaks into your car and steals your stuff, it’s your homeowners and renters insurance, not your auto insurance, that pays out your theft claim? Comprehensive coverage in auto insurance will pay for damage to your car, but it's homeowners insurance that will reimburse you for the stolen property.
That doesn’t mean you should leave all your expensive new purchases in the front seat — you still need to pay your deductible on claims (usually $1,000). There are also limits to this protection, known as off-premises theft coverage.
Off-premises theft is usually capped at $1,000. If a car thief jacks $2,500 worth of Black Friday goods from your trunk and your policy has a $1,000 deductible, you still need to cover $1,500 of the loss out of pocket (deductible plus the remaining loss amount after the $1,000 payout).
Another thing to keep in mind about off-premises theft coverage is it may not cover your personal belongings in certain locations if your insurer deems the area too risky to insure. Off-premises coverage area exclusions are especially common in urban areas with high crime.
Check with your insurance company to see if off-premises theft is excluded from certain areas.
Insure your personal property at its full replacement cost
Double-check your policy and see how your personal property is covered. If it’s covered at its replacement cost, great. If it’s covered at its actual cash value, bad.
With replacement cost coverage, your Black Friday buys are covered at their full replacement value — not the sale price or the depreciated value of the stolen or damaged item. That means if you buy a $1,200 set of kitchenware with a Black Friday markdown of $600 and it’s stolen or destroyed in a disaster, you get a check for its full replacement value ($1,200) rather than the retail price.
Actual cash value coverage is usually cheaper than replacement cost, but your personal property is only insured at its depreciated value.
Consider equipment breakdown coverage for electronic appliances
If Black Friday is known for one thing, it’s massive discounts on electronic appliances. TVs, video game consoles and speaker systems typically come with warranties, but product warranties don’t always provide enough coverage, said Fabio Faschi, property and casualty lead at Policygenius.
Faschi recommends equipment breakdown coverage, a high-value add on to homeowners and renters policies that covers home systems and appliances if they break down. Equipment breakdown coverage has a number of advantages over a manufacturer warranty, namely: it doesn’t expire, it covers more types of breakdown (such as improper installation) and includes loss of use protection if you need to move out of your home because of a broken furnace or HVAC system.
“It’s a great way to protect expensive appliances if they suffer from a mechanical malfunction such as a power surge,” Faschi said.
You can get equipment breakdown coverage for as little as $25 to $50 a year on top of your home insurance premium, Faschi said.
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Image: H. Armstrong Roberts