If you own a home, a homeowners insurance policy is an absolute must. Not only does it cover what will for many people be the biggest investment of their lifetime, but it also provides insurance cover for your personal property. It would be wrong, however, to assume that you can store an unlimited amount of jewelry and even pure gold bars and gold coins on the premises, and your good old home insurance policy will automatically take care of everything. There are many exceptions and limits of which you should be aware. Keep on reading to learn more.

To what extent does standard homeowners insurance cover jewelry?

Homeowners insurance policies typically only cover jewelry up to a certain amount. A standard policy will also only cover jewelry (including gold jewelry) for losses that are caused by a specific number of perils like theft, fire, or tornadoes.

Since it can get stolen so easily, the typical policy places a limit on the maximum amount of cover that’s provided for jewelry. For most standard policies this limit is somewhere in the region of $1,500. This means that if your engagement ring that costs $6,000 is stolen, your home insurance policy will only cover you for $1,500. And that doesn’t even include the standard deductible that applies to most policies.

What are your options if you want to have better jewelry coverage?

If you own a lot of gold jewelry, there are two ways to increase the amount that your homeowners insurance covers.

- Increase the liability limit. This will certainly help. But remember that, even if you increase the total limit for jewelry losses to let’s say $5,000, the maximum amount for an individual piece of jewelry might still be much lower, e.g., $2,000. If you own more expensive items of gold jewelry, you will have to find another way to get them covered.

- Buy what is known as a ‘floater’. This is more expensive than having the liability limit increased, but it provides significantly better protection. A floater is basically an appendix to the basic homeowners insurance policy. It covers any type of loss, including ones that are not covered by the basic homeowners policy. Examples include forgetting your pure gold wedding ring in a Hawaii hotel room or accidentally dropping your 100% pure gold pendant down that same hotel room’s bathroom sink.

To what extent will my homeowners insurance cover gold bars and coins?

In the current uncertain economic climate, many people are switching from stocks, mutual funds, and bonds to gold. With the gold price not long ago breaking the $2,000 per fine ounce barrier, they believe this will protect their family wealth. If you think, however, that you can turn your home into Fort Knox and your standard home insurance policy will cover all of that, think again.

A typical homeowners insurance policy comes with either a zero or a very small limit such as $250 when it comes to providing cover for gold bars or coins. As is the case with jewelry, you can buy extra cover. But even that might not be enough. If you increase the total limit for precious metals to $5,000 and the per-item limit to $2,000 it might take care of your basic needs, you will still end out of  pocket though if there is a burglary and you were storing gold bars worth $1 million under your bed.

The bottom line

After examining the facts it would seem that your homeowners insurance policy is a viable option to protect you against potential losses when it comes to gold jewelry. It is, however, not meant for insuring gold bars or gold coins. Instead of storing these under your bed, you would be much better off getting a proper safe. Otherwise, rent a safe deposit box at your bank.