Most people aren't aware that within a homeowner's policy there are special limits of coverage for many items. A standard homeowner's policy carries coverage limitations that apply to the amount of coverage afforded for certain items as well as the perils insured against for these objects. Jewelry happens to be the one item affected most often by these limitations because it's present is almost every household and can easily be involved in a claim.

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An unendorsed homeowner's policy covers jewelry up to the contents limit for perils described in the policy except theft or mysterious disappearance. These two events happen to be the two most likely causes for a jewelry claim. If a theft or mysterious disappearance occurs, the limit on the homeowner's policy is only $1,000. If the item in question is more than $1000, you're underinsured and responsible for the difference. This gap can easily be closed however.

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Coverage can always be purchased through a jewelry floater (specific schedule) to increase the $1000 value and broaden the coverage for jewelry. When scheduling a particular piece of jewelry, the perils of theft and mysterious disappearance are included. Usually the insurance company requires an appraisal to determine the value of the item to be covered and the exact specifications of the jewelry. For a diamond, the cut, clarity, color or carat is spelled out and for other items, a complete description needs to be included. The dollar value is based solely on the appraisal and has no ceiling. In the event of a claim, the amount paid will equal the cost to replace the item. Be sure not to inflate the value of the item, as the insurance company will only pay what it costs to replace the jewelry not the inflated cost.