What a ‘mysterious disappearance’ insurance clause means

If history is a guide, insurance claims for unexplained disappearances will jump this Halloween.

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

But insurers don’t offer blanket protection to policyholders for lost or damaged property. Some have clauses that explicitly deny payment in cases of such a “mysterious disappearance.”

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

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In general, these rules come into play when a policyholder makes a claim for a lost valuable item but can’t reasonably explain how the item disappeared, said Michael DeLong, an insurance expert at the Consumer Federation of America.

While “ghosts or supernatural things” are unlikely culprits, people do occasionally lose items due to carelessness or forget them in certain places, DeLong said. Insurers don’t want to be on the hook financially in those cases, he added.

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

Otherwise, a policyholder could claim an item disappeared and receive insurance payments even if it’s still in their possession.

But there could be gray areas — for instance, if a skilled thief enters a home or apartment, steals a piece of valuable property but doesn’t leave visible evidence of a break-in, DeLong said.

An insurance investigator may deny the claim, though they would have to find a reasonable basis for doing so, said Peter Kochenburger, deputy director of the Insurance Law Center at the University of Connecticut School of Law.

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

However, you’re not necessarily in the 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 generally only covers renters and homeowners for a “named peril,” Griffin said.

That means a loss must be due to a peril — such as fire, theft, explosion, lightning or a natural disaster — that’s stated in the policy. Items that disappear under mysterious circumstances (i.e., the loss can’t be explained by one of these perils) likely aren’t covered by insurance.

So-called all-risk policies or open perils policies, by contrast, cover any event the policy doesn’t specifically exclude.

Even when insurers do pay a property claim, mysterious disappearance or otherwise, policyholders aren’t necessarily covered for the full cost of replacing an item.

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

However, policyholders can often opt to cover the full cost of valuable items for a higher premium.

“You want to make sure you check your policy,” Kochenburger said. “There’s a decent chance you need to get additional coverage [for an art collection or jewelry].”

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

Buying supplemental coverage may also be a way to skirt any financial gaps that my result from a mysterious disappearance, Griffin said.

Singling out a specific item for coverage on a separate “schedule” to your existing renter’s or homeowners policy (or via a separate policy altogether) generally covers that item for a much broader range of risks — often including an unexplained disappearance, he added.

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