What you should know about collectibles and homeowners insurance

The collectibles market has exploded in recent years as investors increasingly view collectibles as an integral part of their portfolio worth investing money and effort into. But as their collections grow, so does the need to adequately insure and protect their investments.

While collectible art has long been part of the portfolios of wealthy people, it is only in recent years that the market size and value of other types of collectibles have increased dramatically. The pandemic appeared to trigger the boom in collectibles, as casual investors stayed home with cash to burn and a longing for less troubled times spurred interest in items from the past.

Deloitte’s latest research into the value of the art and collectible collections of all ultra-high-net-worth individuals worldwide suggests that this amounts to almost $2.2 trillion. And this number is expected to reach $2.86 trillion by 2026. The collector market is no longer just filled with happy collectors and enthusiastic fans; Collectibles have real value. But with real value comes real risk – and the need to protect it.

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This is why the collector insurance market has grown so much in recent years. Whether it’s cars, handbags or art, item-specific insurance companies have continued to grow as demand for protection increases.

Increasingly, companies like OpenRoad and NFP in Dallas are offering insurance coverage tailored to the specific needs of collectors. For example, OpenRoad offers services for classic and modern collector vehicles and includes a pricing model that takes into account the lower accident rates that often accompany collector vehicles.

It’s a brave new world for collectors – and an essential world to be a part of if a significant portion of your net worth is in collectibles.

Here are four things collectors need to know about their options in the insurance market:

1. Your home insurance may not cut it.

While home insurance policies are designed to cover a range of unnecessary damage to personal property, most policies only cover between $500 and $2,000. So if you have a high-value collection, your home insurance probably doesn’t provide enough coverage.

While many of the major insurers such as State Farm and Allstate may be able to offer additional coverage, it is not guaranteed and requires a discussion with your insurance agent to obtain. In my own experience, using your home insurance may have more restrictions and requirements to get the coverage you need.

2. Be prepared to be prepared.

Most insurance providers – especially if you use a non-specialist insurer – will require you to provide the insurance company with receipts, provenance and proof that your item is worth the claimed value in order to receive the coverage you need. It is not uncommon for an insurer to request re-authentication of a piece or proof of recent authentication.

Collectors looking to apply for insurance coverage need to be prepared and shouldn’t be surprised if the process requires a lot of paperwork.

3. Know what you need and read the fine print.

If you’re investing some of your wealth in collectibles, it’s important to stay abreast of market trends surrounding your collections – not only to understand the health of your portfolio, but also to understand the extent of coverage available you actually need.

Insuring collectibles presents similar concerns to health and automobile insurance, as collectors need to ensure that their deductibles are not so high that they put you in a dangerous position should something happen to your collection. It may be worth taking the loss of a few hundred dollars if your collection is damaged to save a few thousand dollars more.

But when it comes to insuring collectibles, you need to read the fine print carefully. Something like replacement insurance that replaces a damaged item, for example, may not cover an item of equal quality. A mint condition Mickey Mantle card worth several million dollars can’t really be replaced with a much lower graded card worth just a few thousand dollars.

4. Know how to protect your goods.

Certain insurance policies have specific requirements for what is covered and what is not covered. Traveling with your collectibles – such as to a show or rally – may not be covered. Certain damages may also not be covered, depending on how they occurred. Other insurers may require special protection measures for your goods, such as: B. professional framing or defined storage conditions.

As global weather conditions become more extreme, it becomes increasingly important for collectors to understand these nuances of insurance policies as they risk significant financial losses in the event of floods or fires. For this reason, alongside the growing collectors insurance market, there are also companies that specialize in the protective storage and transport of collectibles.

The end result

To maximize the value of your collection, you must make appropriate efforts. Monitoring market trends and understanding how to actively value your collection is critical – not only for your own knowledge, but also for insurance coverage. When items are added to your collection or sold, ensuring your insurance policy stays current can mean a difference of hundreds of thousands of dollars.

As the market for collectibles continues to grow, the need to insure them will continue to increase. With the right coverage, collectors can protect their investments from potential risks and provide their collections with the same risk management that they provide the rest of their portfolio.

This article was written by and represents the views of our contributing consultant, not those of Kiplinger’s editorial team. You can check the consultant documents with the SEC or with FINRA.

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