Artwork, collectibles worth a ton? Here’s what you should know about insuring them

With the Plaza Art Fair just behind us and the holidays ahead, it’s a good time to consider specialized insurance. Do you have priceless jewelry? Are you a collector of wine?

Maybe you like vinyl records or have a rare collection of classic toys. Or perhaps you plan to add to your fine art collection. If you have any of these things, or plan to invest in one, you may want to consider getting specialized insurance for prized possessions.

According to a study by AMA Research, the fine art insurance market value is expected to nearly double in the U.S. by 2027. Part of this is because more people are investing in fine art. People are also finding more items that resonate with them across a variety of outlets and resources. Coins, jewelry, wine, vinyl and toy collections: all these and more can be insured through collectible and art insurance.

You might be wondering if you need this, or if these items are covered by home or renter’s insurance. Your policy might have great coverage from a homeowner’s standpoint, but if you’re an extensive collector or own highly valued items, it might make sense to consider getting insurance for your collectibles. But first, let’s start with a hypothetical situation to give you some perspective.

Picture this: John has a famous, pristine figurine collection from the 1970s that has gained immense value over time. One night, his home is broken into, and half of that collection is stolen, totaling nearly $50,000 in loss. John is obviously upset for many reasons, but he thinks he can at least recover the value by filing a claim with his homeowner’s insurance policy. Unfortunately, it may not be that simple. Why?

First, too many homeowner’s claims can hurt you.

Often, people file a claim on their home insurance policy because of an issue like equipment breakdown or theft. You can file that and get at least some of the value back. However, these claims add up and after just a few claims, you can become uninsurable.

Homeowners insurance should be used when there is massive or complete devastation. Unfortunately, most people don’t know this until it’s time for them to file another claim or renew their policy. At that time, because of your history, you can be blindsided by a massive rate increase, or you can’t be renewed in the primary market. You would then have to look to a secondary insurance market where the costs are higher for less coverage.

Having a specialty insurance for your art or collectibles allows you to file a claim specifically within that coverage, thus not affecting your main homeowner’s insurance policy. If John had a specialty insurance policy, he would be able to file a claim within that and never have to worry about whether it would affect his homeowner’s insurance.

Next, be aware of your replacement value.

There are two types of replacement values when it comes to replacing the value of an item: Limited replacement value and full collectible value. As mentioned above, the value of John’s stolen property was $50,000, so you’d think he would get the full amount back, right? Not necessarily.

Insurance policies that don’t specialize or have specific verbiage regarding the coverage often contain language about limited replacement value. This means they will either only cover the value of the items that were taken when they were first purchased and not consider the increase in value, or they will only reimburse up to the standard amount that’s in the agreed-upon language of the policy. In John’s case, his homeowner’s insurance policy may only cover a minimal amount of $5,000, meaning he’d be out $45,000 if he files.

Specialty insurance policies consider the full collectible value and understand that it could now be worth more than when he purchased it. It is important to note, however, that a current appraisal is often necessary to fully understand the value of the items. If John files the claim within his specialty insurance policy, they’ll review its value and work with him to get his money back.

Finally, consider the zero deductible option.

This one is pretty simple: If you file within the homeowner’s insurance policy, you’ll likely have to pay a deductible. So if John were to file within his homeowner’s insurance policy, he would have to pay his deductible of $2,500 before he could get any of the $5,000 back.

Specialty insurance alleviates this because many have a zero deductible option. So, if you’re filing the claim within this policy, you don’t have to worry about paying anything before you’re reimbursed for your loss.

Remember, filing too many claims in any policy can make you high risk. Insurance is an incredibly important thing to have, but understand all your options before doing anything. We recommend talking to your broker to better understand your policy and your options.

“Let’s Talk Money” is presented by CommunityAmerica Credit Union. This week’s feature comes from Insurance Sales Representative Dominic Gomez.