Insurance for CollectiblesBy Bonnie S. Salzman
As the saying goes, if you have more than two of something, you have a collection. But have you ever thought that you may need to insure that collection? And how do you go about it? This article will help provide some answers to those questions, and give you information you need to make an informed decision about insurance for your collection.
There are an estimated 90 million collectors in the United States and over 2000 general collecting categories. The antique and collecting industry is estimated at $25 billion per year. The investment in antiques, art and collectibles has out-performed many other investments. Although we invest time, money and space in our collections, the majority of us do not carry insurance for our collections or are unaware of a policy’s limitations. A recent survey conducted by Chubb Insurance, underwriters of PBS’s Antiques Roadshow, found that many people did not know the limitations of their coverage or what the coverage actually would pay if an item was lost, broken, or stolen.
If you have homeowner’s insurance, would it replace that collectible that you recently purchased at auction if you accidentally dropped it? If you mail a few pieces off for repair and they are lost in transit, would your policy cover the cost of replacement? If you do have insurance, it’s important to talk to your agent to understand your coverage, its limitations, and on what basis a claim will be paid. If you don’t have insurance coverage, you should consider it. Look at your collection. Could you afford to replace those items that might break when a stray ball hits a cabinet, or a shelf collapses, or you dropped a piece during the cleaning process? You also should assess whether your collection is no longer just a hobby, but also an investment.
Types of Insurance
Insurance policies used to insure privately owned collections are often referred to as “scheduled personal property floaters” or “personal inland marine floaters” and are specifically designed to provide coverage for collectibles. These floater policies often provide very broad coverage. For example, coverage is often provided on an “open causes of loss” basis, which would include risks of loss such as fire, theft, breakage, and natural disaster. It is important to read the policy carefully to determine the causes of loss insured, the excluded exposures, and the conditions of coverage.
Floater policies are offered through insurance companies that are classified as either “admitted” or “non-admitted.” Admitted insurance companies are licensed by a state insurance department to conduct business in the particular state and, generally, the coverage forms and rates are required to be submitted to the state insurance department for review and approval. Your homeowner’s insurer is most likely an admitted insurance company. In contrast, non-admitted (also known as surplus lines) insurers are authorized by the state regulator to conduct business in the particular state, but the coverage forms and rates are not regulated. Because the coverage forms and rates used by non-admitted insurers are not regulated, these insurers have the flexibility to design insurance policies that can be used to cover unique or unusual types of property.
There is one other significant difference between admitted and non-admitted insurers. If an admitted insurer becomes financially impaired or insolvent, most state insurance departments have the authority to take over the operation of the company and most states have a guaranty fund in place to provide payments for covered claims to help minimize the financial loss to policyholders resulting from an insurer’s insolvency. However, state insurance departments do not have the authority to take over the operation of a non-admitted insurer and the state’s guaranty fund does not respond to insolvencies of non-admitted insurers.
Before obtaining any policy from an insurance company, you should call your state’s insurance department to make sure that the company is licensed to do business in your state, and any additional information they have, such as the length of time the company has been licensed, the types of insurance provided, and any complaints against the company.
Policy Features and Coverage
Depending on what you collect, the following items should, at a minimum, be included in any collectibles insurance policy:
In addition to the above, you may also wish to consider automatic travel and exhibit coverage (note that this does not include coverage for dealers) and moving coverage.
Valuation, Appraisal and Inventory
For most collections, the insurer should not require a detailed inventory or any type of professional appraisal in order to obtain coverage. However, the company may require a list of single items with very high values. This is not uncommon, and can be easily provided if you have kept receipts for your purchases. Although an inventory may not be required, it is still up to you to place a value on your collection. This may be difficult to do if you have never kept records or don’t have an inventory.
An appraisal is one way of determining the value of your collection. This may be a good idea, particularly if you have no idea of its value. Generally, an appraiser will need to be physically present at the location of the collection, so that the collection can be viewed, measured, documented and photographed. The appraiser will then research your collection, and ultimately provide you with a written appraisal report. This report will contain information about the purpose and type of appraisal conducted. The report should contain a complete description of each item, including size, markings, characteristics and value. A photo of each item is included, as well as a glossary of terms and bibliography of materials used to research and determine value.
An appraiser should be certified by the American Society of Appraisers or the International Society of Appraisers, and use the Uniform Standards of Professional Appraisal Practice. Most appraisers charge an hourly rate, but may also be willing to estimate their time and quote a flat fee for the appraisal. Fees should not be based on a percentage of value. Travel expenses are also added to the appraisal fees.
An inventory of your collection can provide you with not only current valuation, but also help keep track of your purchases, spending, length of time you have held the item, and the like. More importantly, it can assist you with proof of loss when you do have a claim. All insurers require some proof of loss, other than your say so. Some documentation of the item, or a sample of the item, will be required.
If you learn nothing else from this article, please take away the thought that an inventory of your collection is essential. You do not need to invest in any software, although there are several available. All you need is pencil and paper. At a minimum, you should track the following information for each item:
Finally, each item should be assigned a unique identifier, that is, a number or series of letters, so that you can identify the item to the inventory description. You can purchase a roll of color coding dots for less than $2, and number them sequentially. Each time you have a new piece, add it to your inventory list, and attach the corresponding numbered dot to the bottom of the bottle. Keep all receipts for your purchases in a folder, and note the inventory number on the receipt. That way, if you ever do have a loss, you can easily find the inventory description, as well as the receipt for the item.
For those of you who are computer savvy, and like to keep things in order on a PC, it’s fairly easy to create a database in Access or a spreadsheet in Excel, or the equivalent software. In addition, there is inventory software specifically designed for collections which is available for purchase on-line. These include Collection Master (www.nortica.com), The Collectibles Database (www.collectiblesdatabase.com) and Collectible Manager (www.ultimediasoftware.com). You may find more by doing a general search.
There are a number of websites with information about collectibles insurance which are very helpful. Do some research and obtain information about several insurance companies before you purchase a policy.