Insurance companies generally define theft the same as everyone else (i.e., someone takes property that doesn’t belong to them). Several types of policies, including homeowners insurance policies, come with theft insurance. In insurance-speak, that means theft is typically a covered peril in those policies.
Because theft is a covered peril, most homeowners don’t need a separate theft insurance policy. The coverage appears in their home insurance under:
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Personal property coverage. Coverage C is probably what comes to mind when you think about a loss from theft because it helps replace stolen items.
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Dwelling coverage. A thief can also cause physical damage to your home. Coverage A helps pay for repairs, such as broken door frames.
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Other structures coverage. If a detached structure like a garage or shed is damaged by an intruder, Coverage B can help with those repairs.
Having your property stolen can be a traumatic experience. But the theft coverage in your homeowners policy can be a big help in getting things back to normal.
When is theft covered?
If someone breaks into your home, your homeowners policy typically covers your stolen items as well as any damage the thief caused. One cool feature in home insurance is that most policies even cover these losses when they occur away from your home. This means that if someone steals from your hotel room while you are on vacation, your insurance company most likely covers that loss up to your policy limits.
How much coverage for theft do I have?
Home insurance policies don’t necessarily cover the entirety of your losses. How much you recover in a claim is usually impacted by your:
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Coverage limits. Insurance companies typically put a limit of liability on each of the coverages offered in your policy (i.e., the maximum amount your insurer pays for a claim). If a thief takes $50,000 worth of property, but you only have $40,000 in personal property coverage, then you’re going to come up short.
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Deductibles. Let’s assume the thief also smashes in your front door. Your policy covers that damage, but it also has a $500 deductible. You’re responsible for covering that amount for any repairs.
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Sublimits. Most insurance companies also place sublimits on valuable personal property. A sublimit caps the amount you recover, sometimes limiting your coverage to just $1,500.
Sublimits are common for items like computers, jewelry, fine art, and collectibles. You can protect these items with a scheduled personal property endorsement.
When is theft not covered?
Not all theft scenarios are covered. For example, home insurance policies typically exclude theft if the items were stolen:
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By you.
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From a home that’s under construction.
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From a home that you rent.
As for the first exclusion, insurance companies simply don’t cover an insured’s illegal actions. But the other two are about increased risk. For example, more people come in and out of a home when it’s under construction, so there’s a greater chance of something being stolen.
The same is usually true when you rent the home out. Even if you believe you know your tenants very well, their presence (and their guests, for that matter) increases your risk for theft. Luckily, landlord insurance also covers theft.
You should also note that homeowners insurance seldom covers stolen cash ﹘mainly because it’s difficult to prove the loss.
What about identity theft?
While some homeowners insurance policies cover losses due to identity theft, this is relatively rare. Most insurance companies offer identity fraud insurance as an additional rider or endorsement. While you’re not on the hook for debts taken out in your name illegally by fraudsters, this type of insurance can help cover the expenses that come with straightening out identity theft and other losses that can result.
Some of the expenses that identity theft insurance can cover include:
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Legal and accounting fees required to restore your identity.
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Fees for credit monitoring or pulling your credit to look for fraudulent debts.
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Lost wages if you’re unable to work while resolving the fraud.
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Loan fees if you’ve been turned down for financing as a result of the fraud and need to reapply.
If you’re concerned about identity theft and want to protect yourself against potential losses that may result, consider adding identity theft coverage to your homeowners policy.
