January 19, 2015
You may face an important gap in insurance coverage if you maintain a collection of items such as fine art, sports memorabilia, jewelry, guns, furs, antiques, stamps, coins, wine, dolls/toys, action figures or auto/movie memorabilia and rely on your homeowner’s policy to insure your collection. Without additional coverage, your collection will likely be lumped in with the remainder of your personal property if you experience a catastrophic loss due to fire, theft, etc. Your homeowner’s policy may allow you to recover only a percentage of the value of your personal property in such a situation and the applicable limits may not be sufficient to cover the total value of your personal property when your collection is added in. Additionally, there may be specific limits of coverage applied to recovery for the items you have collected. Oftentimes, those limits will be extremely low; in some instances as low as $2,000.
Other problems may arise if you suffer a loss to your collection and need to make a claim. Your homeowner’s policy may have required appraisals during the underwriting process to support any claim. Homeowner’s policies may also insure the items only for actual cash value as opposed to collectible value, may limit the perils covered and exclude coverage for your collection items when they are in transit or stored away from home. Homeowner policies may also apply significant deductibles.
Specialized policies or riders are normally available for collections. This specialized coverage usually carries significant advantages. Beyond more appropriate valuation procedures and policy limits, specialized coverage may include zero dollar deductibles, may not require prior appraisals to support a claim and may also provide coverage for broader ranges of perils such as times when your collection items are in transit, newly acquired objects that have not yet been identified to the policy and items stored away from your home. Premiums for this specialized coverage are generally lower than you think and may include discount programs arising from use of security or fire safety measures. Claims under such a policy will also normally involve an adjuster with specialized knowledge concerning the nature of the items included in your collection.
So if you collect, even sporadically, and rely on your homeowner’s policy to insure your collection, you should think about discussing the size and value of your collection with your insurance agent or look into the availability of a separate, specialized policy applicable to your specific collection.