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Insuring Gift Cards - Personal Lines

Author: Mike Edwards

Gift cards have become an increasingly popular form of giving for Christmas, birthdays, and many other occasions. The ease of using gift cards for online shopping (called "e-gifting" by the industry) has significantly contributed to the popularity of gift cards for almost any occasion. If a gift card is lost or stolen, is there any coverage for the lost value under a homeowners policy?

  

QuestionWe had a staff meeting this morning, and the subject of holiday gift cards came up. Since they are increasingly popular at Christmas, as well as other gift-giving occasions, is there any coverage under the Homeowners Policy if they are lost or stolen, etc.? These days, a person could easily have several hundred dollars worth of cards after Christmas, and possibly much more than that as wedding gifts.

AnswerGreat question! And to say that gift cards are “increasingly popular” is quite an understatement! 

The ISO Homeowners Policy (both 2011 and 2000 editions) treats gift cards the same as cash, providing just $200 in the aggregate — meaning that’s the total amount of coverage for all items in that category (see excerpt below), no matter how many cards an insured had. In addition, cards that are “lost” would not be covered at all, since the perils that apply to Coverage C are named perils only, unless an insured has the HO 00 05.  Note also that while cash and every other type of property in that category is subject to the Section I deductible, the deductible is subtracted from the loss to covered property, and never to an internal limit (such as the $200 cash limit).

While gift cards have been around for several years, it wasn’t until the HO-2000 edition of the Homeowners Policy that ISO included language addressing how they were covered under the policy. In the HO-2011 and HO-2000 editions, they are referred to as “stored value cards,” and not “gift cards” – see excerpt below.

However, in the previous 1991 edition, since gift cards were not specifically mentioned, there was some confusion between coverage for gift cards vs. credit cards, which were covered for $500, with no deductible. While most authorities assumed that gift cards should be treated as cash, the HO 00 03 04 91 edition policy provided no specific guidance on that point.

Here is the relevant excerpt from the HO-2011 and HO-2000 editions of the HO 00 03:

C. Coverage C – Personal Property
   3. Special Limits Of Liability
      The special limit for each category shown below
      is the total limit for each loss for all property
      in that category.These special limits do not
      increase the Coverage C limit of liability.
      a. $200 on money, bank notes, bullion, gold other
         than goldware, silver other than silverware,
         platinum other than platinumware, coins,
         medals, scrip, stored value cards and smart
         cards.

Lastly, under ISO rules, the $200 limit on cash and similar items of property (including stored value cards) can be increased up to $1,000 on the HO-3, using endorsement HO 04 65 Coverage C Increased Special Limits of Liability. (Use the HO 04 66 with an HO-5.) Also, check with your individual markets to see if they adopted this optional coverage. The cost is typically around $6 per $100 of coverage.

 

Last Updated:  December 12, 2014

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