PF&M at a Glance

Personal Inland Marine

In most instances, it’s easy to cover personal property. Most residential package policies (homeowners, mobile home or condo-owners) cover such property automatically. Under a standard homeowners (HO) policy, contents are usually insured as a stated percentage (40% to 60%) of the insurance limit written for the residence.

Residential property coverage and the premiums charged for it are based on a couple of important assumptions. One is that the household property is commonly found in a home and is readily replaced. The other is that the property is modestly valued and not particularly susceptible to loss (because of its being fragile or especially attractive to thieves). Standard residential policies, however, treat “special” property harshly, either excluding or substantially limiting the coverage. This creates a huge coverage gap for a person who owns any significant amounts of such property.

Personal Inland Marine helps close the above-mentioned gap. It refers to forms that insure special classes of personal property that have the following characteristics:

• Are subject to minimal (or no) coverage under an unendorsed homeowners policy
• Have a very high value, particularly in proportion to their size
• Tend to have a higher vulnerability to loss or destruction
• Are particularly likely to suffer loss by theft
• Are more likely to be the subject of fraudulent claims

A Personal Inland Marine contract, whether in the form of an endorsement or a separate policy, covers scheduled jewelry, furs, fine arts, stamp collections, coin collections, silverware, musical instruments, cameras and golf equipment.

An important benefit of scheduling is the automatic protection for newly acquired items. Coverage for new purchases, however, applies only when scheduled coverage already exists for similar property. The automatic limit is 25% of the insurance amount for the class of property involved or $10,000, whichever is less. This coverage feature allows homeowners a reasonable time to report their new property and, most important, have their coverage adjusted. Generally, coverage ceases on a newly acquired item if it is not reported within 30 days.

Newly acquired fine art

When fine arts are scheduled, coverage applies to other objects of art that an insured acquires (purchases, finds, inherits) during the policy period. However, coverage is:

• Usually limited to the new property’s actual cash value
• Restricted to no more than 25% of the amount of insurance applicable to fine arts already scheduled
• Limited to property of the same class for which coverage already exists (see example above)
• Lost if the new property is not reported within a specified reporting period, typically 30 to 90 days

The additional premium an insured owes on the new fine art acquisition is computed pro rata from the date of purchase. For more information on covering this class of property, please refer to PF&M Section 430.3, Fine Arts Insurance.

Coverage territory

Coverage applies anywhere in the world except for fine arts, which are covered only within the United States (including territories and possessions) and Canada.

Exclusions and limitations

Personal Inland Marine coverage does not insure against loss or damage caused by:

• Wear and tear, or gradual deterioration
• Insects, vermin or inherent vice
• Any form of nuclear incident
• Hostile or warlike actions
• Seizure or destruction under quarantine or customs regulations
• Confiscation by order of any government or public authority
• Risks of contraband or illegal transportation or trade

The importance of scheduling valuable personal items should be clear to insurance consumers and their agents. Scheduling:

• Provides appropriate limits of insurance for property subject to reduced limits of insurance under a homeowners policy
• Provides significantly broader coverage for valuable items that face special exposure to loss
• Typically provides global coverage
• Removes high-value items from the Personal Property section of a homeowners policy, increasing the coverage for general personal property
• Encourages the insured to maintain current appraisals and other valuation data for valuable items, minimizing settlement problems

Please note that this is only an overview of this coverage. A thorough discussion of the program may be found in the PF&M Analysis from The Rough Notes Company. Agency OnLine subscribers, please refer to PF&M Section 430, which includes a variety of topics involving Personal Inland Marine. *

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