The holidays are a time when family members exchange thoughtful gifts. In the case of family keepsakes – jewelry, watches, etc. – these gifts require careful management on your insurance policy. Update your policies accordingly!
Think about a family example: they have beautiful pearl earrings that family members have handed down through the generations. The mother wants to eventually pass them down to her daughter, just as her own mother did to her. Meanwhile, this family also owns grandfather’s watch, which the father has worn for years and wants to bequeath to his own son. These parents have done their homework – they’ve dutifully had the watch and the earrings appraised (we recommend doing so every five years or so), and have scheduled them on their homeowner’s policy.
Now comes the daughter’s wedding day, and Mom desperately wants the bride to wear the beautiful pearl earrings. She lets the bride borrow the earrings, and doesn’t put a timeline on their return. The husband, meanwhile, hasn’t worn that watch in a long time, so the parents decide it’s time to gift it to their son.
During the daughter’s honeymoon, her apartment has a horrible fire that destroys all her possessions – including the earrings. The son lives in the same building, and also lost everything – including the watch recently given to him. There were no injuries, thank goodness, but now comes the important question: can you make an insurance claim for both the earrings and the watch?
Although both possessions remain as scheduled items on the parents’ homeowner’s insurance, the short answer is: yes and no.
Huh? You’ll recall that a homeowner’s policy will provide coverage for your property anywhere in the world, but it will NOT cover property that is no longer yours. The earrings were loaned to the daughter, and thus still belonged to the parents. Ownership did not transfer, so the coverage continues under the parents’ homeowner’s policy.
The watch, on the other hand, was gifted to the son – replete with a beautiful card telling him to take good care of it. Because the parents formally transferred ownership of the property, it no longer belongs to them, and thus they do not have coverage under their homeowner’s insurance. Unfortunately, the son did not have his own insurance. So, no coverage at all for the watch.
This scenario depicts the ways that a gift can have serious implications for insurance coverage. If you have valuables that are transferring ownership this holiday season, make sure you have them properly covered.
Happy holidays from Swerling Milton Winnick!