Traditionally, collectable items were limited to the likes of antique furniture, coins and stamps, but as fascination with collecting unusual items, such as celebrities possessions or comic books grows, so too does the complexity of insuring these valuable collections. With that in mind, it is imperative that brokers understand how to ensure valuable collections receive appropriate cover when standard household content cover is simply not enough.
Fine art has always been a popular choice for collectors, but according to a study conducted by Barclays Wealth and Investment; high net worth individuals are increasingly collecting items such as jewellery, fine wines, antique furniture and classic motor vehicles. These individuals in particular often view their collections as more than just a passion but an investment as well.
At MUA we have seen clients with collections ranging from Nazi memorabilia worth a total of R1 million to a comic book collection tothe value of R3 million. However, no matter what the value of the collection, it is critical to obtain the correct kind of insurance cover either from a specialist art insurer or to source an insurance policy with a special extension under the contents section that caters specifically for insurance of fine arts and collectables.
In the event of a catastrophic loss, a specialist insurance policy can mean the difference between having a claim paid out or not. Standard homeowners’ policies usually have a per-item limit or inner contents limits e.g. 10% of the sum insured, which falls far short of the full replacement value for the collection. As a result, it is better to have a policy that provides coverage that is designed specifically for collectables should something happen to these distinctive or rare items.
By choosing a specialist insurer, a broker can also add a number of special extensions to an insurance policy. A specialist insurer can provide additional coverage such as the depreciation of art, or even a premium for the death of the artist, where the sum insured is automatically increased by 150% in the year following the death.
Another advantage of specialist insurance policies is that they often include inflation protection, which takes into consideration inflation of the original valuation price so that clients do not lose out on an increase in value of their collectable.
In the event of restorations or repairs needed to be conducted on collectable items, specialist insurers typically have contacts with artisans and experts who understand the value and delicacy of the restoration process.
It is important for brokers to advise any client with a valuable collection to have a professional valuation done at the inception of the policy to ensure they are covered for the correct replacement value. Brokers should insist that client’s obtain a valuation from a reputable art dealer or a specialist antique valuator. A properly documented inventory of items and up-to-date valuation certificates are the most important assets when filing a claim for valuables, as they are almost always a requirement by insurers at the time of a loss.
Another factor for brokers to bear in mind when sourcing appropriate insurance for their client is to determine whether they intend to replace valuable items in the event of loss. Some clients have no intention to replace certain valuables, especially items that have been inherited, as the true value is of sentimental nature. In these cases, it is important to determine the correct replacement value and specifically agree with the insurer to either cover the items for a lower amount on an agreed value basis or to exclude the items altogether.
For example, a client with an extensive book collection may not intend to replace it in the event of loss, but if they forget to include it in the overall sum insured, this omission can lead to substantial underinsurance on the contents value, which may result in a reduction on any payout.
Of particular importance, is choosing a reputable insurer with the required reinsurance capacity and financial security to insure valuable items. It is also vital that the insurance provider has the correct level of expertise to handle the more complex issues associated with claims for fine arts and collectables.
Brokers are always looking for ways to distinguish themselves and add value to their clients. By expressing interest in something that’s near to their client’s heart and advising them on how best to protect these valuable assets, they are more likely to gain customer loyalty.