Floater – Coverage for Property That Moves
In plain language: A floater is a type of insurance policy that provides coverage for valuable belongings that move around, like jewelry or musical instruments, no matter where they are located.
Technical definition: A floater, also known as floater insurance coverage, is a provision in the insurance policy that covers movable property. This supplementary insurance ‘floats’ with the items it covers, offering protection beyond the usual limits of a standard homeowner’s or renter’s insurance, typically from risks like theft, loss, or accidental damage. It is commonly seen in personal property or commercial property insurance policies.
For clients with expensive, portable items, a floater can be an essential coverage to ensure adequate protection. Valuable items like artworks, jewelry, or equipment could exceed the coverage limits in a standard policy, leaving the owner with a financial hole.
TL;DR
- Floater is an insurance coverage for movable items
- Vital in day-to-day operations as it provides additional protection for valuable items that exceed standard policy limits
- A common misunderstanding is that standard coverage is enough. Many forget that their policy limits could be insufficient to cover high-value items
- A quick win for agencies is to assess the total value of a client’s personal belongings and suggest a floater policy if necessary
What Is Floater in Insurance?
A floater, or floater policy, provides additional insurance coverage for movable property or items. This coverage is called ‘floater’ as it moves with the item it covers, regardless of the item’s location. It typically comes as an endorsement or a rider attached to a homeowner’s, renter’s or commercial property insurance.
Where do you find this coverage in an insurance policy? It commonly appears in the declarations page or as an endorsement in a homeowners or commercial policy. Floater policies often extend coverage beyond the usual limits of a standard policy, and they cover risks like theft, accidental damage, or loss. This policy enhancement is particularly valuable where standard policy limits may be insufficient to cover high-value items like expensive equipment, artworks, or jewelry.
Key Related Terms to Know
- Insurance Rider – an addition or amendment to an insurance policy that adjusts the coverage or terms
- Installation Floater – a specific type of floater policy that offers coverage for materials from the moment they are loaded onto a truck until installed and accepted by the property owner
- Personal Property Floater – a policy or addition that extends coverage on movable property like jewelry, musical instruments, or artworks
- Floater Coverage – insurance that covers movable property, and follows the property from place to place
Common Questions About Floater
What is a Personal Article Floater?
A personal article floater extends coverage on valuable personal articles that aren’t fully covered under a standard home insurance policy. This can include high-end electronics, jewelry, and collectibles. For instance, if you owned a valuable piece of artwork that was stolen during travel, a personal article floater would cover its loss.
How does an Installation Floater Work?
An installation floater is a type of floater insurance that insures materials from the time they are loaded onto a truck to their installation. It is often used in construction, protecting materials and fixtures until they are installed and the business owner accepts them.
What is the Difference Between Floater Insurance and Standard Coverage?
Floater insurance provides additional coverage for valuable movable property. Unlike standard coverage, it covers these items against risks, including damage, theft, or loss, wherever they are located. Standard home insurance usually covers belongings only up to a certain limit and only within the premises of the insured property.
Floater vs. Property Coverage
Water coverage and property coverage serve different purposes.
Comparison Area | Floater | Property Coverage
|
Primary use case | To provide additional coverage for movable property | To provide basic coverage for immovable property |
Coverage / concept type | Coverage for movable property that follows the item wherever it goes | Covers stationary property like building and its contents |
Typical exclusions | Wear and tear, gradual deterioration | Earthquake, flood, neglect |
Who is most affected by errors | Owners of high-value portable items | Homeowners and business owners |
Common mistakes | Underestimating the value of items | Underinsuring property, neglecting regular property reviews |
Real Claim Examples Involving Floater
Scenario 1: A professional violinist insured his $100,000 violin under a floater policy. While on tour, the violin was accidentally knocked over and damaged. Because of the floater coverage, he was able to get it repaired without incurring out-of-pocket costs.
Scenario 2: A couple known for their extensive jewelry collection had a personal articles floater in their insurance coverage. During a vacation, they discovered some items missing from their luggage. The floater policy coverage ensured they were compensated for their loss.
Scenario 3: A homeowner had a pricey piece of artwork hanging in her living room. A water leak from the ceiling damaged the artwork. Without a floater policy, the standard homeowner’s insurance would not have covered the entire worth of the artwork. However, with the floater coverage, the homeowner was able to recover the total value of the artwork.
Limitations and Common Mistakes
- Floater coverage does not extend to wear and tear or gradual deterioration.
- Believing that standard homeowner’s or renter’s insurance is sufficient to cover all belongings – in reality, high-value items may require a floater policy.
- Underestimating the value of items to be covered, leading to inadequate coverage.
- Not updating the floater coverage after acquiring new valuable items.
How to Explain Floater to Clients
Personal Lines client “You have beautiful artwork in your home. I just want to ensure it is adequately protected. Standard homeowners’ policy has limitations, and it might not cover the entire value of your artwork. A floater policy, however, moves with your precious items and provides robust coverage, ensuring you’re protected against theft, total loss, or even accidental damage.”
Small Business owner “It’s great that you’ve invested in high-end equipment for your business. But, did you know our standard policy might not fully cover these items with all risks? That’s where a floater policy comes in. It provides coverage for your movable equipment regardless of where it is.”
CFO or Risk Manager “I appreciate your organization’s efforts to secure its assets. Given the extensive list of high-value, movable items, having a floater insurance is highly recommended. It provides coverage tailored for movable items, wherever they are, providing extra protection against unexpected losses or damages.”