Soon our society will be able to breathe a sigh of relief as more and more of us are able to get vaccinated. Shortly after, I know I will be looking to jump on a plane for a long awaited vacation. Whether your destination is to visit family and friends, relax on the beach, hit the slopes, or just to find a quiet hideaway – taking a vacation during the next few months usually means hauling a lot of extra luggage, such as skis, golf clubs, jewelry, cameras, and other valuable stuff. The chance of your luggage getting lost or stolen isn’t high – historically less than one percent of travelers reported mishandled luggage, according to the latest U.S. Department of Transportation’s Air Travel Consumer Report. Yet baggage-handling accidents and thefts do happen, which is why it’s important to have the proper insurance in place before your depart for your destination.
An important consideration to keep in mind as you pack your bags; most airlines have a list of items they will not cover if lost or stolen. That commonly includes money, jewelry and even cameras. So, if you’re worried about something of high monetary or sentimental value going ‘MIA’ during your trip, it’s probably best to leave it at home or stow it in your carry-on.
If the worst-case scenario happens and your luggage is lost or damaged, you most likely have some recourse options to recover most of your loss. Most domestic flights do have a baggage reimbursement limit of $3,500 per person. The limit varies for international flights based on your destination. You may need to submit proof, such as receipts, photos, or electronic records, demonstrating the current value of the lost items in order to get reimbursed by the airline. It’s also important to remember that the airline will only pay you for the current value of a lost item (also known as “actual cash value”); not the original price you paid for the items or their current “replacement cost”.
Many airlines do offer “excess value” protection if your luggage is worth more than the standard per person limits. Few offer you any additional coverage beyond higher limits. You can view these policies on-line at the airline’s website.
Maybe you plan to take out “Trip Insurance”. It pays when your trip is interrupted for a variety of reasons and often offers more liberal coverage for your luggage and with or without a deductible.
Fortunately, if you already have a homeowner’s or renter’s insurance policy in place, you are most likely covered if your luggage is lost, stolen, or damaged during travel. The standard ISO format of such a policy provides coverage for 10% of your personal property limit anywhere in the world. While most policies offer protection for your belongings regardless of your location, there are considerations to keep in mind.
Your policy is likely going to reimburse you for your lost items on ‘Replacement Cost’ basis; not the airline’s depreciated value. But your homeowner’s or renter’s policy will have a deductible of $500-1,000 (the amount of a loss you are responsible for).
Basically, you recover the value of the lost items minus your deductible through the Homeowner’s. On the other hand the airline is going to pay you from the first dollar of a loss based on depreciated value of your items. Which of these is going to ‘net’ you a greater recovery?
You cannot collect from both the insurance company and the airline at the same time for the same loss. If you seek to recover from your insurance company, they will pay you for your loss then go after the airline for what they paid out. When they receive a settlement, they will return a portion or all of your deductible to you.
Another consideration before deciding to go after your homeowners instead of the airline; your homeowner or renters insurance rates are impacted by your claims experience. A claim against the homeowners is going to affect your future homeowner rates for the next three years! Usually, the owners policy should be the lesser desired option; the better recovery option is usually the travel insurance and then the airline.
Here’s another consideration when taking valuables on a trip such as jewelry, high end cameras, sporting equipment, or computers. These items often have a specific maximum coverage limit of coverage under a homeowner policy. For example, Jewelry in the standard homeowner’s policy has a $1,000 limit. Some companies offer higher limits and you can purchase a special “rider”, or endorsement for items to be “scheduled” on your policy. Such “riders” usually specifically identify a particular item or collection considered unique or of a higher value. The coverage offered by a “rider” is usually broader than commonly found under a traditional homeowner’s policy. With a “rider” you usually specify the value or limit and deductibles can be lower than your homeowner’s policy, if any deductible at all. Rule of thumb with such a rider, a loss is covered for anything that happens to the item unless it is specifically excluded in the policy. So if it is lost enroute to your destination, stolen from your hotel room, or lost while sailing in the Caribbean, you’d be covered potentially from dollar one.
Obviously it is debatable whether you need additional coverage, and if the added cost is worth it. If you are flying into or through an airport with a higher than average frequency of lost luggage claims, you want to consider what you are packing, your insurance coverages and your recourses after a loss. If you’re unsure of what your homeowner’s or renter’s insurance policy covers, don’t hesitate to contact your independent insurance agent who will be happy to review your policy and answer any of your questions. Safe travels– when we can finally take that trip!