Your House Was Robbed! Will Home Insurance Cover Your Stuff?

More than 1.1 million burglaries occurred in 2019, according to the FBI. When a thief enters a home, a property owner could face substantial losses both because the thief could take items and also because the thief could damage the property.

If a homeowner has their stuff stolen, the big question is, do they have to pay to replace it out of their checking account? Fortunately, in most cases, the answer is no. That's because a homeowners insurance policy will usually cover the stolen items. There are, however, some important limitations to be aware of to avoid out-of-pocket losses.

When does homeowners insurance cover stolen property?

Homeowners insurance typically pays for the property stolen within a home as long as the property owner had personal property coverage.

Personal property coverage is an additional kind of protection that comes with most homeowners insurance policies. While dwelling coverage pays for issues with the house itself, personal property coverage pays for the stuff in the home that belongs to the owner.

Dwelling coverage pays for losses up to policy limits, which are usually set at a percentage of the amount of dwelling coverage. For example, if a home was covered for $500,000 and personal property coverage was equal to 50% of that, the personal property part of the insurance policy would pay for up to $250,000 in property stolen during a robbery

If you buy a standard home insurance policy, your insurer will most likely include personal property coverage by default when providing a quote for coverage. But lenders don't require this coverage, so it is optional. And the amount that the insurer offers may not be correct based on the value of each individual property owner's possessions.

It's up to each homeowner to make sure that they take a look at the policy terms and confirm that all of their stuff -- and not just the house -- is insured against losses.

There are limits for certain kinds of property

While personal property insurance will typically cover losses up to policy limits, that's a general rule. There's all kinds of fine print when it comes to insurance -- including strict limits on the value of certain items.

Insurance companies generally cap coverage for possessions like collectibles, jewelry, and furs. Homeowners may be limited to recovering no more than $1,500 for the value of their jewelry, for example, even if they have tens of thousands of dollars in valuable jewels at home.

It is possible to buy add-on coverage for expensive items in most cases. For example, many insurers provide standalone policies or riders that homeowners can add to their homeowners coverage. To insure jewelry, for instance, a homeowner might pay an extra cost of around 1% to 2% of the value of the item.

Again, reading the fine print of an insurance policy -- or asking an agent -- will be important to make sure all property is protected in case of a robbery.

It's crucial to have replacement value coverage

Finally, homeowners should make sure that they have replacement value coverage for their possessions, as opposed to market value coverage. With replacement value coverage, insurance will pay the cost of replacing stolen (or damaged) items. But market value coverage would pay only what the items were worth at the time of robbery. Since a used couch or bed isn't worth much, this would often leave homeowners without the money to reasonably replace the items they lost.

Homeowners should be prepared for the risk of a robbery -- or other losses to their personal property -- by checking their insurance coverage today to make sure they have the right protections in place.