My true passion is audio/video, specifically home theater, but insurance pays the bills and, believe it or not, is quite enjoyable on its own.

For years, I have always wondered how I could fuse the two together and just recently thought that maybe a great blog post or two could shed some light on the topic of “how to insure your home theater or listening room.”

Ranging from my pretty modest “under 20k do-it-yourself theater build” to the master planned and constructed $200-$300k builds for dedicated listening and screening rooms, the same few questions keep popping up over at AVS and some other forums I frequent about how to protect our passion from disaster. We spend so much time planning, building, and tweaking our rooms, but spend so little on how to protect it from a major loss.

So let’s tackle this thing one peice at a time and if I miss something that has been bothering you, shoot me an e-mail or leave a comment below and I will find the answer for you or include it in a future blog post.

How to Insure Your Home Theater or Listening Room

A brief statement about insurance before we get started.

In its simplest definition, insurance is meant to put you (the policy holder) back to pre-loss condition, no better no worse, for covered perils (accidents) by paying the insurance company a premium. It’s simply a promise to pay in the event of a loss.

Over the years, we (buyers of insurance… I’m taking my agent hat off) have been notorious for getting our insurance coverage “as cheap as possible” and agents (ok, hats back on) have been doing this by selling progressively leaner coverage with the highest deductible to get your business.

We, as home theater enthusiasts, may need more than just the basic coverage that a homeowner policy brings to the table.

How are home theaters typically covered?

So in general, how are our rooms covered?

In most cases, your homeowners coverage picks up your home theater or listening room (as well as other electronics, tools, clothes, and furniture) in a specific coverage section called “contents.” This coverage, while key to the average homeowner, can cause us enthusiasts some problems (you can read about the other main coverage called structures and how it is calculated here).  Specifically:

• The contents amount is based on a percentage of your home’s replacement value (in my case 65% based on my policy) and is meant to cover all of your personal property that resides within the bounds of your physical property.
• A claim that falls under contents coverage is subject to your full deductible.
• If I completed the work myself, how does my insurance cover “my work?”
• Is <<<insert horrible disaster here>>> covered?

So what’s the problem with this?

Let’s look at the first point. Take your home and multiply it by .65 – is this enough coverage for not only your room but also for everything else that the homeowner’s contents section was designed to cover?

We’ve seen claims to fully replace the clothes in your closet get up to $60,000 dollars, so you need to count everything: suits, shoes, plates, appliances, all the TV’s, furniture…EVERYTHING.

I know it seems ridiculous to think about, but imagine you pulling up to your home and it being gone (or on fire) and you need a check from the insurance company with a number on it to buy everything again. I’ve seen some of you guys post on AVS with $50,000 projectors and $80,000 Crestron control systems; even some of the entry level stuff like I have can add up to $10,000 pretty quickly so you can see how the contents amount of your homeowner’s insurance policy may need to be revisited.

I would say take your room’s cost + (.65*replacement cost) = new contents coverage limit. This can be bought up to a stated amount for fairly cheap.

What should your deductible be?

Next, any claim you make for contents is subject to your full insurance policy’s deductible. Most deductibles are a few thousand dollars but most of us have ours set to 1% of our home’s replacement cost to keep our premium down. For example, a $500,000 home = $5,000 deductible, a $1,000,000 home = $10,000 deductible, and so on. To make matters worse I’ve seen a ton of policies lately with a 2% deductible, so double those numbers if your policy states that amount.

So 1% or even 2% may not seem like that big of a deal in a major loss like a catastrophic fire or flood that damages your entire home, but what about something that happens more often like a lightning strike that knocks out your projector and amplifiers or water damage from wind-driven rain? Do we really want to pay $10,000 to cover $14,000 of loss on something that could realistically happen in the next few years?

Honestly, it’s a decision that each homeowner has to make for themselves as, obviously, some of us are a little more risky than others (called Personal Risk Tolerance); but personally, I’d rather pay a little more to drop my deductible down to a more reasonable amount that could cover some of these losses. Buying back a $1,000 deductible is not as much as you might think.

How do you value your labor?

Next is a question that is rarely posed but something I have thought about long and hard after looking through some of these 40 page build threads.

It’s easy to say my build costs less than $20k because that’s all I spent on “hard costs.” Every single hour of labor was done myself. Running wire, painting, stapling fabric, programming, setup, testing, calibrating, etc., done by me and only me. So if I were to lose everything to a fire or another “uh-oh” moment, how would insurance respond to cover my work?

For those that contracted the work out, the answer is pretty easy. You have a written estimate, change order(s), and a receipt from your contractor for all the work done with a big number at the bottom (you should be saving all of these documents, by the way). Your spouse or significant other probably doesn’t know the real figure, but you do and, more importantly, it’s written down. This is absolutely covered under your policy.

Fortunately, us DIY guys can claim the same thing, but think back to our original statement about what insurance is: “it’s meant to put you back in pre-loss condition, no better no worse.” What this means is that giving you an amount for building materials and equipment and NOT for your labor means you’re putting in your labor again (which most of us wouldn’t mind doing) but this violates the “no worse” part of our definition. Some of these builds are taking hundreds if not thousands of hours and the second time around, we may want to let a contractor do it for us, or at least we’d like to be able to entertain that option to keep the peace in the house. Insurance would cover this expense for your work, but there are some things that we can do to make this easier for the insurance carrier and adjuster:

• Keep a running list of all expenses for equipment and building supplies, receipts are gold and you should keep everyone of them in a fire proof safe
• Keep pictures of your build in all major stages (this never seems to be a problem)
• Keep model and serial numbers of all equipment
• Ballpark the amount of hours spent on each section of your project as your building from initial design to final calibration of your room
• Finally, if you really want to get down to it, get a contractor to look at your build and give you a quote to recreate it (you may want to offer a few bucks for their time)

In all reality, your room may yield you a special case which would cause the adjuster and pull in some outside resources (home theater and artisan contractors) that specialize in what you’ve done to your room to get a true accurate cost of replacement.

What specifically is covered?

Finally, we get to the big question that is always out there:  “is _________ covered?”

It’s a very broad question, but one that can usually never be answered without directly referencing your policy and situation. I challenge everyone to dig that thing out and really take a look at it, specifically the sections called perils (what is and isn’t considered an accident), deductibles, and the exclusions section (reasons the insurance company would deny your claim).

Named Peril policies cover a basic series of items, which include: fire, lightening, wind/hail, vandalism, smoke damage, water (sudden & accidental only, up to policy limits), and a few other basics (see your specific policy for clarification). All risk policies (which can apply all risk coverage to your home (HO-3 policy form), or home and contents (HO-5 policy form)), place a much broader level of protection in that any loss is covered unless specifically excluded in the policy (see exclusions section). The more direct language of the all risk policy can work in your favor as it takes a lot of the ambiguity out of the policy and gives you direct knowledge of, yes, this is covered.

I think that’s going to wrap this up for now. This got a little more wordy than I thought but I would like to offer my team’s assistance to anyone that has any further questions on how to insure your home theater or listening room.

This is an unbelievable hobby and passion for so many of us, and really we can do a lot to protect our investment with very little additional premium (and sometimes none at all).

If you liked what you have read, feel free to share this among your friends or give us a link on any forum when these kinds of questions come up. As always, if you’d like a second or third look at your current situation and policy you can reach the CoVerica Team here.