What kind of insurance do I need for collectibles and artwork?

A personal passion can evolve into a collection that means a great deal to the individual, and some pieces, whether through rarity, time, or public attention, can become quite valuable.

Losing a collection in a fire or other covered peril can be devastating. And, this loss can be compounded when a homeowner learns that there are limits on what homeowners insurance policies cover.

If you are a collector—from wine to comic books to antiques to artwork—it is important to understand the insurance limitations of your basic homeowners insurance policy, and what type of additional coverages you may need to protect your collectibles.

Does my homeowners insurance cover collectibles?

A basic homeowners insurance policy covers your personal property, but will have stated limits. If you have contents coverage of $200,000, that covers your “stuff,” like your furniture, clothing, linens, cookware and dishes, and other household items.

However, your policy also likely contains what are known as “sub-limits.” These are limits imposed on different categories, and it is important to know what they are and how this might affect your claim in the event of a loss—and how this impacts collectibles.

Some examples of personal property that are covered by insurance but have a sub-limit include items such as jewelry, cash, coins, and firearms.

A sub-limit restricts the amount of a claim for a single category. If a fire destroys a jewelry box with $10,000 of jewelry in it, but the insurance policy sub-limit is $2,000 for jewelry, that’s all that will be covered in a claim.

Collectibles that fall under certain categories would be subject to sub-limits, potentially leaving them largely unprotected.

Do I need special insurance for collectibles?

As with most insurance questions, the answer is “it depends”—but yes, you will likely need special insurance coverage for your collectibles.

If you are just starting to collect and only have a few small pieces that are not high-value, your homeowners insurance policy may cover them in the event of a loss.

As your collection grows, or when you add pieces that are of higher value, you’ll need either a separate rider or specialized collectors insurance.

What is collectors insurance?

Collectors insurance is separate coverage available to protect your collections. Some insurers may set a minimum value level for the entire collection before it is eligible for coverage.

Three Hummel figurines worth $500 each may not qualify for separate collectors insurance coverage. The most likely option to insure these would be to add a rider to your existing homeowners insurance policy.

However, if you have 50 Hummels of varying age and rarity with an estimated collective value of $15,000, the collection would likely be eligible for collectors insurance.

Most collectors insurance will explicitly exclude items that do not have a market value, or items that are used for everyday purposes—so no matter how many rubber bands or bottle caps someone has collected, those items would likely not qualify for collectors insurance coverage.

How is artwork insured?

It’s important to establish what we mean when we talk about insuring artwork. Art can be a very subjective category. If you purchase a handmade pottery vase while you are on vacation, is that considered housewares, or art? Complicating this, where you purchased it might make a difference—was the vase purchased in a gallery, or at a store that carries tableware? How much did it cost?

Paintings, sculpture, ceramics, and even fiber art can be insured. You’ll probably need to purchase a separate rider to cover artwork, as your homeowners insurance policy likely has sub-limits on losses related to artwork. When you decide to insure your art, be prepared to provide a list of the works you own.

You may also be asked to provide provenance, which is essentially a document that shows the history of ownership of a specific piece of art. Receipts are one way to establish provenance. If you inherited or were gifted a piece of artwork, try and gather as much evidence as possible to demonstrate a chain of ownership.

Your insurer might ask for the piece to be appraised, which can help determine how much the piece is worth and what type of insurance coverage to purchase.

Serious art collectors can purchase fine arts insurance, which offers some additional features specific to high-end art, such as title insurance. Title insurance is used to protect collectors from defects in provenance, which can happen with older artwork and antiquities, as documentation from prior owners may not be available.

What is the difference between an appraised value and an insured value?

An appraisal will provide a professional assessment as to what the market value is of a collectible or piece of art. There are three main organizations for appraisers: the American Society of Appraisers, the International Society of Appraisers, and The Appraisers Association of America. An appraisal will consider things like the condition of items within a collection, authenticity/provenance, rarity, and the current market for similar items.

An insured value is the amount of coverage you will want to secure, as it is designed to help you replace the item if it is destroyed as a result of a covered peril. The insured value is typically higher than the appraised value.

What is the difference between stated value and agreed value?

Agreed value is a number arrived at between you and the insurer of the value of an item being covered by insurance. This is the amount that you’ll be covered for if you ever need to file a claim, minus any deductibles.

Stated value is what you, as the collector, state the value of a specific item. An insurer is not required to pay a claim for the stated amount if it is higher than the current market value—the insurance company will pay either the stated value or current market value, whichever is lower at the time the claim is made.

Some people use stated value as a way to reduce their premiums, but this is a risky tactic. If a collector states a lower-than-market value in order to pay less on a premium and then something happens to the collection, the insurer is only obligated to pay the claim based on the lower amount.

What types of collections can be insured?

The good news is that most types of collections that have a market value can be insured. You’ll most likely need to provide an insurer with an inventory of your collection, along with any documents establishing provenance (if that applies), and appraisals.

Continue to update this inventory as you add items to your collection; it is important to keep this list as up-to-date as possible.

Specialized collectibles coverage and art collection coverage sometimes include automatic coverage for newly acquired pieces for a set period of time, from a month up to 90 days.

If you want to learn more about collections insurance, contact the experts at Rate Insurance. With access to specialized insurers and policies, they can help to determine what type of insurance works best for your collection, so that it is protected now and as it grows.

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