Alabama Property and Casualty Practice Exam

How would your Homeowners policy respond if a $5,000 gold watch is stolen?

1. The watch would be covered

2. The loss would be excluded

3. The loss would be limited in coverage

4. It would depend upon the circumstances of the theft

The correct answer is: The loss would be limited in coverage

Homeowners policies typically provide coverage for personal property, but there are specific limitations on certain types of property, including high-value items like jewelry and watches. In this scenario, while the gold watch may initially seem like it would be covered under the personal property section of the homeowners policy, there are often coverage limits that apply to valuable items, including jewelry and watches. These limitations mean that although a loss may be covered, there might be a cap on the amount that the insurance will pay for the theft of such valuable items. Many standard homeowners policies have specific limits for personal property categories, and high-value items may require additional coverage or coverage endorsements to be fully protected. Therefore, if a $5,000 gold watch is stolen, the loss would likely be limited in coverage due to these standard policy restrictions, which would result in a payout that is less than the full value of the watch unless the homeowner has taken extra steps to insure it properly. This context aligns with the idea that while the policy provides some coverage, it may not cover the full value of the loss, reflecting the limitation in coverage specific to high-value personal property.