You may experience a 'mysterious disappearance' on Halloween - and insurance probably won't pay for it

You may experience a ‘mysterious disappearance’ on Halloween – and insurance probably won’t pay for it

Lawrence Bates | time | Getty Images

If history is any guide, insurance claims for unexplained disappearances are going to jump this Halloween.

Renters’ and homeowners’ insurance claims related to a “mysterious disappearance” rose 5% on Halloween and 3% on Mischief Night, which is the day before Halloween, according to claims data from Travelers Insurance from 2011 to 2021.

But insurers do not offer comprehensive protection to policyholders for lost or damaged property. Some have clauses that explicitly deny payment in the event of such a “mysterious disappearance”.

“Not all policies have them, but some have them,” Don Griffin, vice president of the policy, research and international division of the American Property Casualty Insurance Association, said of the clauses. “If he disappeared under mysterious circumstances, that often means he’s not covered.”

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Mysterious disappearing clauses help thwart fraud

Typically, these rules come into play when an insured makes a claim for a lost valuable item but cannot reasonably explain how the item went missing, said Consumer Federation of America insurance adjuster Michael DeLong.

Although “ghosts or supernatural things” are unlikely culprits, people sometimes lose items through carelessness or forget them in certain places, DeLong said. Insurers do not want to be financially liable in these cases, he added.

Clauses are also a way to prevent insurance fraud, experts said.

Otherwise, an insured could declare an item missing and receive insurance payments even though it is still in their possession.

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But there could be gray areas — for example, if a robber breaks into a house or apartment, steals valuables but leaves no visible evidence of a break-in, DeLong said.

An insurance investigator can deny the claim, though they must find a reasonable basis to do so, said Peter Kochenburger, associate director of the University of Connecticut Law School’s Center for Insurance Law.

Filing and recording a police report may be enough to satisfy an insurer in such cases, Kochenburger said.

Why “Named Perils” Matter in Insurance Coverage

However, you’re not necessarily clear just because your policy doesn’t explicitly omit a “mysterious disappearance”.

Most policies implicitly exclude these events, experts said.

When it comes to personal property, insurance typically only covers renters and homeowners for a “named peril,” Griffin said.

This means that a loss must be due to a peril – such as fire, theft, explosion, lightning or natural disaster – which is stated in the policy. Items that go missing under mysterious circumstances (i.e. the loss cannot be explained by one of these perils) are likely not covered by insurance.

So-called all-risk or open-risk policies, on the other hand, cover any event that the policy does not specifically exclude.

Why Your Valuables May Not Be Fully Covered

Even when insurers pay for a loss, mysterious disappearance or the like, policyholders are not necessarily covered for the full cost of replacing an item.

Sub-limits may apply. For example, your monthly premium can insure you up to $20,000 of personal property in total. But your policy may cap reimbursement for certain categories, such as a maximum of $2,000 for jewelry, $2,500 for furs, $3,000 for electronics, or $5,000 for artwork.

However, policyholders can often choose to cover the full cost of valuables for a higher premium.

“You want to make sure you check your policy,” Kochenburger said. “Chances are you’ll need some extra coverage [for an art collection or jewelry].”

“It’s a common mistake and it’s also easy to avoid,” he added.

Buying additional coverage can also be a way to work around financial shortfalls resulting from a mysterious disappearance, Griffin said.

Choosing a specific item for cover on a separate “schedule” to your existing renter or homeowner policy (or via a separate policy) generally covers that item for a much wider range of risks – often including a disappearance. unexplained, he added.

“These things are pretty rare, but they happen,” Griffin said.

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