What You Should Know About Coverage Limits vs. Special Limits

Most people are aware of the coverage limits of their homeowner’s insurance policy.  But, they may not be aware of other special limits that might apply in the event of a claim.  It’s vital to know the difference between coverage limits vs. special limits for certain covered items.  You don’t want to be caught without sufficient protection.

Although coverage limits are outlined on the declarations page of your policy, special limits are less obvious.  So, you may need to read the fine print to find out exactly how much you’ll be paid for a claim.  Knowing the difference between coverage limits vs. special limits will allow you to add riders or endorsements to increase your coverage if needed.

What Are Coverage Limits?  

A coverage limit is the maximum amount your insurance provider will pay on a covered loss.  For example, standard homeowners policies provide coverage that helps pay to repair or replace a home and its contents.  This coverage can include loss from fire, smoke, lightning, wind, hail, or vandalism.

Most insurance providers apply the ‘80% Rule’ that requires homeowners to have replacement cost coverage equivalent to 80% of the total replacement cost.  

Many factors affect your home’s replacement cost such as: 

  • The age of the home
  • Local labor and construction costs
  • Square footage of your home
  • Special features such as fireplaces, arched windows, etc
  • Recent upgrades or renovations

You may be underinsured without realizing it, particularly if you have remodeled your home. Check with your insurer to see if you need additional coverage. 

What Are Special Limits?

Homeowners’ special limits apply to certain items that fall under the personal property category.  For example, let’s say you have personal property coverage of $8,000.  Within that coverage, a $1,000 special limit applies specifically to jewelry.  

Although you have proof of the actual value of your items, the payout is based on the maximum amount payable stated in the special limits clause.  This means that regardless of the value of the item that was lost or stolen, you’ll only be compensated $1,000.  

When Do Special Limits Apply?

Special limits may apply to items other than jewelry.  Read your policy carefully to understand what you can expect to be compensated for a claim involving the following:

  • Fire department service
  • Sewer water backup
  • Additional living expenses
  • Food spoilage due to power outages
  • Debris removal
  • Guns, antiques, collectibles, furs, tools, art, securities
  • Gold, silver, or platinum-ware
  • Watercraft, trailers
  • On-premises or off-premises home office or business
  • Lifestyle items such as computers, gaming consoles, sports equipment, bicycles

You may be able to add additional coverage for these items via riders or endorsements.  Contact your agent to learn more about these options.  

Why Do Certain Items Have Special Limits?

Insurers work hard to keep insurance affordable for the general populace.  When certain items are designated as special limits items, their value is based on what the average person would own.  The limits are updated to take into account current lifestyles. You should review your policy regularly to make sure your coverage is current and adequate.

Where to Find the Special Limits in Your Policy

Most standard homeowners policies have the heading “Coverage C: Personal Property.”  Typically, you should find the special limits under this section.  However, some policies may have a different format, depending on the company.  If you’re having trouble finding what you’re looking for, your agent can help.

Special Limits and Deductibles

Some covered items with special limits are subject to deductibles.  Others don’t have a deductible at all.  A few of the things that don’t have a deductible may be fire department service, debris removal, or additional living expenses.  Of course, these can vary from one insurer to another.  Check with your agent about the deductibles so you’ll know what to expect before you have to file a claim.

Examples of Policy Add-Ons for Increased Coverage

To avoid financial loss due to special limits in your policy, consider the following add-ons to extend your coverage:

  • Extended Replacement Cost – Extends your limits an additional 25 to 50 percent.
  • Guaranteed Replacement Cost – Covers the full cost of rebuilding your home regardless of the cost without a cap on how much it will pay out.
  • Inflation Guard – Increases the dwelling coverage limits yearly to account for inflation.
  • Ordinance or Law – Covers rebuilding costs to comply with local ordinances and building laws.  

These add-ons vary by state and by insurer.  Your local agent can help you learn what is offered in your state.  

Sandifer Insurance Will Help You Get the Right Homeowners Coverage for Your Needs and Budget

Most people are confused by homeowners insurance terms.  For this reason, many homeowners find that they don’t have as much coverage as they thought.  We can help you avoid that situation.  

If you’re unsure about your homeowner’s coverage, reach out to Sandifer Insurance Agency.  We have over 40 years of experience in helping clients get the right insurance for their needs and budget.

Whether you need a new policy or want to update your existing policy, we will be happy to recommend affordable coverage that is right for you.

Contact us by phone, email, or online if you have more questions about coverage limits vs. special limits or other insurance information.     


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