Why You Should Consider Specialized Insurance

This article was recently published in CommunityAmerica's "Let's Talk Money" section of the Kansas City Star.

 

Do you have priceless jewelry? Are you a collector of wine? Maybe you like vinyl records or have a rare collection of class toys. Or perhaps you have a fine art collection throughout your home. If you have any of these things, you may want to consider getting specialized insurance for these prized possessions.

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

So, you might be wondering, “Why do I need this?” or “Isn’t this covered by my home or renter’s insurance?” Well, your policy might have great coverage from a homeowner’s standpoint, but if you’re an extensive collector or own highly valued items, here are three reasons why you should consider getting insurance for your collectibles. But first, let’s start with a hypothetical situation to give you some perspective.

Picture this: Our friend, John, has a famous, pristine figurine collection from the 1970’s that has gained immense value over time. One night, his home is unfortunately 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.

1. Too Many Homeowner’s Claims Can Hurt You

Far too 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 (more on that in a little bit). However, these claims add up and after just a few claims, you could 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.

2. 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. Like was mentioned above, the value of John’s stolen property was now at $50,000, so you’d think he would get the full $50,000 back, right? Well, not necessarily.

Insurance policies that don’t specialize or have specific verbiage regarding the coverage often contain language about Limited Replacement Value. This means that they will either only cover the value of the items that were taken when it was 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 only covers a minimal amount of $5,000, meaning he’s out that other $45,000 if he files with them. With specialty insurance policies, they 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.

3. 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 can get any of the $5,000 back, further making the situation painful.

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.

Specialty insurance can be a very beneficial way to ensure your things are cared for while also giving you peace of mind that your policies won’t be affected if you do have to file a claim. I encourage you to reach out to CommunityAmerica Insurance Agency. A broker can talk with you about your specific situation and find the right policies for you, your loved ones, and your prized possessions.