Maybe over the past decade or two you’ve slowly built a collection of paintings and sculptures by local artists. Or maybe you’ve become fascinated by Chinese porcelain or Mexican folk art and suddenly realized that you have quite a large collection. You find yourself wondering if you should insure your collection. The first thing to do is evaluate your homeowner’s insurance policy to see what is covered. Artwork and other collectibles which exceed a certain threshold of value will need a separate rider for that policy. Though a typical homeowners insurance policy can provide some coverage, it’s usually very little – anywhere from about $2,000 to $5,000 total for each class of valuables. Most homeowners insurance companies require a separate rider for an artwork or collection if it is valued over $5,000. Even with an added rider, homeowners policies tend to limit the level of exposure. A separate collectibles insurance policy may be warranted if your collection has significant value and if you want broader coverage apart than what is available under your homeowners policy rider.
One of the most important coverage differences between a homeowners policy/rider and a separate collectibles policy is the valuation of covered items. Homeowners policies tend to insure for a market cash value while separate art and collectibles policies insure the full collectible value. You will need to get an appraisal of your collection by an accredited appraiser to determine its “retail replacement value” for insurance— the highest amount that would be required to replace an item with a similar piece – to ensure you are adequately covered. Homeowners policies generally cover named perils only and exclude coverage for items during transit, limit coverage on items stored away from the home to as little as 10 to 15 percent, and extend coverage to newly acquired items for only 30 days. By contrast, separate art and collectibles policies typically include all risk coverage and provide coverage for items in transit, items stored away from the home (such as in an office or storage facility), and newly acquired items for up to 90 days. Some collectibles policies may offer additional coverage benefits such as discounts for monitored fire and burglar alarms
Bottom line: evaluate if the loss or damage of an artwork or collection would cause you significant financial distress. If you are unsure of the value of your artwork or collection, or whether you should purchase a rider to a homeowners policy or separate collectibles policy, you should retain the services of an accredited art and/or collectibles appraiser (American Society of Appraisers, Appraisers Association of America, International Society of Appraisers).
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