WITH THE PROPERTY INSURANCE MARKET IN CHAOS AND HOMEOWNER’S POLICY PREMIUMS SKYROCKETING, IT’S CRITICAL FOR COLLECTORS TO UNDERSTAND THEIR COVERAGE OPTIONS
By James Appleton
The U.S. homeowner’s insurance market has become a trending topic nationwide, and – spoiler alert – the news is not good. A former California insurance commissioner described that state’s market as “in chaos.” The same could apply to other states, notably Texas and Florida. But as we look toward the end of 2024, it’s clear that no state is immune to the insurance market changes now underway.
You may be wondering how this applies to you as an avid collector. The bottom line is this: If your collectibles are insured through your homeowner’s policy, you are playing a high-stakes game of chance. Depending on where your home is located, one claim could result in a significant premium increase or the loss of your insurance policy altogether.
Specialty monoline policies are designed specifically to protect valuable collectibles like this set of 1968 Topps baseball cards available in Heritage’s October 4-6 Fall Sports Catalog Auction.
Property Insurance Market Drivers
What triggered the disruption in the homeowner’s insurance market? The short answer is that for several years insurance carriers have been paying claims at unprecedented levels resulting from catastrophic weather events (hurricanes, tornadoes, wind and hail), wildfire, earthquake and other perils. At the same time, property values have increased along with the costs of labor and materials. As a result, carriers are now taking steps to readjust their risk profiles by raising premiums, increasing deductibles, implementing tighter underwriting guidelines and nonrenewing policies that are deemed too risky. Some insurance carriers have pulled out of certain problematic areas or entire states, drastically reducing coverage availability for property owners.
Claims Under Scrutiny
If you insure your collection via a rider on your homeowner’s policy, it’s important to understand the implications of making a claim in the current insurance market. It’s not overstating the situation to say that property insurance carriers across the U.S. are scrutinizing every property policy – new and renewal, residential and commercial – to identify the potential for losses due to catastrophic weather, natural disasters, the policyholder’s previous claim history and more. Each carrier uses its own risk modeling data and establishes its own underwriting criteria to stay within its risk tolerance.
Every claim made against a homeowner’s policy, even on a collectibles rider, is factored into the analysis when it comes time to renew an existing policy or bind coverage for a new account. Based on that risk assessment, the carrier may choose to renew a homeowner’s policy but drastically increase the premium. In Arizona, MiniCo underwriters have seen reports of up to 70% premium increases on accounts with minimal or no claims history for the previous three to five years. Another option for a carrier is to decline coverage. Claims forgiveness is harder to come by in today’s underwriting guidelines. Accounts with more challenging claim activity are being declined or nonrenewed with greater frequency.
Vintage comic books are another collectibles category that can be insured with a specialty collectibles policy.
Specialty Collectibles Insurance Policies
If you are concerned about insuring your collection under your homeowner’s policy or wish to explore other coverage options, a specialty monoline collectibles policy is a convenient and effective solution. Monoline (or stand-alone) insurance policies offer a single type of coverage and are not connected to a homeowner’s policy. Specialty monoline policies are designed specifically to protect valuable collectibles, and the benefits extend far beyond reducing the risk of increased homeowner’s premiums.
Top Four Reasons to Choose a Specialty Collectibles Policy
- Valuation of Covered Items: Many collections increase in value over time. Collectibles policies insure your items for their full collectible (appreciated) value. Most homeowner’s policies limit coverage to actual cash value.
- Covered Perils: Monoline collectibles policies tend to be “all-risk,” meaning they may offer coverage for your items while in transit, collections stored away from home (such as in a self-storage facility), accidental breakage and mysterious disappearance. Under a homeowner’s policy, coverage is generally provided for named perils only.
- No Deductibles or Sub-Limits: The deductible on a homeowner’s policy applies to all covered property, including items covered on a collectibles rider. In addition, the policy may impose sub-limits for insured collectibles that cap claims payouts to as little as $500. Specialty collectibles policies typically offer a zero-dollar deductible option and no sub-limits on coverage.
- Hassle-Free Application Process: Insuring a collection under a homeowner’s policy generally requires submitting a detailed inventory and appraisals for all items to be covered. In contrast, monoline collectibles policies frequently do not require submitting an appraisal or inventory to bind coverage (although exceptions may apply for items in certain categories or individual high-value pieces).
Collecting fine silver, like this Georg Jensen tea and coffee service available in Heritage’s November 13 Silver & Vertu Signature® Auction, can be a big investment. One way to further protect that investment is with a collectibles policy, which would insure the items for their full appreciated value.
Partnering With Your Insurance Agent
As the property insurance market tightens, it’s important to proactively protect your collection and the investment it represents. Reach out to your insurance agent to discuss your options when it comes to insuring fine art, memorabilia and other collections. Your agent can help you understand where your current coverage might fall short. If it makes sense to look beyond a standard homeowner’s policy, they can guide you through available insurance solutions and assist in identifying a policy that offers optimal protection for your valuable treasures.
You have invested money, time and effort to curate your collection. It makes sense to take the time to learn about your insurance options and choose a policy that offers protection for your valuables and peace of mind for you.
JAMES APPLETON is Director of Program Sales for Phoenix-based MiniCo Insurance, a Jencap company. MiniCo offers monoline specialty insurance specifically designed to cover fine art, collectibles and items expected to increase in value. Additional information is available at MiniCoCollectiblesDirect.com.