One of the first pairs of sneakers Michael Jordan wore as a professional basketball player could become the most valuable pair ever sold at auction, CNBC recently reported. The red-and-white Nike Air Ships, which Jordan wore in 1984 during his rookie season, are being offered by Sotheby’s and opened for advanced bidding on Oct. 8. The signed sneakers are estimated to sell for $1 million to $1.5 million when they are auctioned on Oct. 24. The current record for an auctioned sneaker was set in August of 2020 when a game-worn pair of Air Jordan 1s sold for $615,000.
The size-13 Nike Air Ships were reportedly owned by a former ball boy for the Denver Nuggets who received the shoes as a gift from the basketball legend in 1984. Interest in high-end sneakers on auction has “exploded” in recent years, the Wall Street Journal reported, and the overall sneaker resale market is on track to reach $30 billion by 2030.
“If you think about the time of Michael Jordan coming out as a rookie and who was watching him make that magic happen, these are now the adults who have been in the job market for a while and may have accumulated some wealth,” said Heather Posner, Associate Vice President, Director, Private Client, Burns & Wilcox, Cleveland, Ohio. “The buyer may have grown up idolizing Michael Jordan. A lot of individuals who collect sports memorabilia are long-term collectors.”
Anytime a client purchases an item like this, a Personal Articles Floater is always the solution. Always.
These high-value purchases should be protected with a Personal Articles Floater insurance policy, said Sarah Chandonnet, Manager, Personal Insurance, Burns & Wilcox, Detroit/Farmington Hills, Michigan. This policy can cover direct physical losses to high-value items due to breakage, fire, wind, theft, mysterious disappearance and other causes.
“If your home suffers a fire loss, experiences flooding or an earthquake or a theft, your standard Homeowners Insurance will not protect those big-ticket items that you may have,” she said. “That is why it is so important for the passionate collector to protect their investment. Anytime a client purchases an item like this, a Personal Articles Floater is always the solution. Always.”
Sports memorabilia values rising as millennials seek nostalgia, investment diversity
A September article in Fashion United called sneakers the “most lucrative and fast-paced” items in the fashion industry, with limited supply and more peer-to-peer selling contributing to the growth. In April, Bloomberg reported on the sneaker boom and how young resellers are treating sneakers as a “bona fide asset class.” In addition, the overall market for sports memorabilia is booming, Forbes reported in February. The rising values could be attributed in part to the increase in digital reselling platforms and increased visibility, Posner said.
During the pandemic, many high-net-worth individuals have been “acquiring more than they ever had,” possibly due to having more time on their hands, Chandonnet said. This has led to increased interest in insurance coverage for collections. “We are seeing collectibles like sports memorabilia and sneakers become a really fast-growing category for Personal Inland Marine exposure,” she said.
Millennials have become sort of the big-spenders when it comes to art and collections.
In April, a rare pair of Kanye West’s Nike Air Yeezys sold for a record-breaking $1.8 million in a private sale, CNN reported. In 2019, Canadian entrepreneur Miles Nadal paid more than $1 million Canadian for 99 sneakers at auction and $577,000 Canadian for a rare pair of Nike “Moon Shoe” sneakers, according to a Canadian Broadcasting Corporation report.
According to auction house Sotheby’s, sneakers represent one of its fastest growing categories, and the majority of its new clients in this market are between 20 to 40 years old, CNBC reported. “Millennials have become sort of the big-spenders when it comes to art and collections,” Posner noted.
These younger collectors are “typically individuals who have a passion for the sports industry and they want to continue to collect and build on that,” Chandonnet agreed. “They are making a hobby out of preserving and taking great care of these collectible items.”
While passion and nostalgia are usually among the primary reasons for pursuing a collection, these buyers also tend to “understand the desire for diversification in their investments,” Posner explained.
“The first reason they buy the item is personal satisfaction; they are so excited about what they are buying. There are also entire social groups dedicated to being a collector of something,” she said. “There is also the potential for extraordinary gain in the art market and the sports memorabilia market.”
Personal Articles Floater can be tailored to cover market appreciation, transit, more
Also known as Personal Inland Marine Insurance, a Personal Articles Floater is available for any type of collection, from sports memorabilia to jewelry and artwork. Appraisals are often needed to verify an item’s value, and some policies can offer market appreciation coverage for up to 150% of the current insured value. Other add-ons to these policies include coverage for loss in value, newly acquired items and items in transit, Chandonnet said.
“There are things in a Personal Articles Floater that can really cover an item well and ensure that the item is properly covered,” she said. “We want to make sure every time we are offering a policy, we are advocating for the client and making sure they have adequate terms in place.”
Insuring items to their full value is critical, Posner added. “Sometimes these items can increase in value extremely quickly,” she said. “They want to make sure they are getting the right terms and knowing what will be paid out.”
There are things in a Personal Articles Floater that can really cover an item well and ensure that the item is properly covered. We want to make sure every time we are offering a policy, we are advocating for the client and making sure they have adequate terms in place.
Personal Articles Floaters should be updated anytime someone adds to their collection, starts a new type of collection, or purchases a single high-value item. This can be a standalone policy or added to a Homeowners Insurance policy. This is necessary even for owners of high-value homes who may assume their Homeowners Insurance will cover high-value contents.
“Regardless of if you have a high-net-worth or standard Homeowners Insurance policy, you need to make sure you have an adequate Personal Articles Floater in place to cover these items,” Chandonnet said. “If something does happen, there is no way a standard Homeowners Insurance policy would accurately pay out this large of an item.”
With sports memorabilia in particular, buyers who have been slowly collecting for many years — even at a lower cost per item — could find themselves uninsured at the time of a loss if they did not realize their collection’s full value.
“If they have spent 30 years buying one pair of sneakers per year, and each of those has gone up in value, that could easily be many thousands of dollars of shoes,” Posner said. “They could have them stacked up in their closet and if a water loss happens, now they are ruined. That is the collector who is more likely to not have the appropriate insurance.”
Specialized brokers can advise on insurance coverage, loss prevention steps
Collectors should catalogue their items thoroughly and have them appraised regularly, Chandonnet pointed out. “Valuation is very important,” she said. The same advice applies to homeowners, many of whom have seen their home values rise rapidly in recent years and may no longer be insured to full replacement cost on their Homeowners Insurance.
“The cost of lumber has increased, materials are hard to find, and the average home is going for 20% or 30% more than it was last year or the year before, so you need to be adequately covered,” Chandonnet said. “We are seeing some homes in California where a home was worth $800,000 20 years ago and now it is a $12 million home.”
Collectors should ask their insurance broker about home alarms, storage solutions and other protective measures that are needed for their specific high-value items. Central station alarms should be maintained and kept active, and safes should be bolted down, for example.
“It is really important to have mitigation in place as collectors are accruing additional items,” Chandonnet said. “In addition to home security, they need to realize there is potential for more of a disaster if they do not have these items properly preserved, cared for and stored. For California purchases, wildfire protection is really important. You want to have a plan for any collectible items in your home.”
The name of the game is not to have the insurance claim, so the risk management is important. No matter what, it would be heartbreaking to lose an item like that. They can at least feel whole by having enough insurance.
Just as collectors should not place valuable items above a fireplace mantel due to the risk of heat and smoke, homeowners should also consider the risk of water intrusion based on the room where their valuables are stored, Posner said. “If there is a kitchen or bathroom in the space above you, there is a water risk and it could come from the ceiling or down the wall,” she explained.
Insurance companies may even have requirements for how certain collectibles are stored, Posner noted. To navigate these issues and more, establishing a strong broker relationship is key. “The right advisor can educate the client on risk mitigation,” she said. “You want a broker where this type of collection is the norm for their client, not the exception.”
Without the right insurance, a loss could be devastating financially as well as emotionally. “These are passionate individuals who want to protect their investments,” Chandonnet said. “If they are not properly insured and a loss happens, they may not have the opportunity to ever get that item again.”
Posner agreed: “The name of the game is not to have the insurance claim, so the risk management is important,” she said. “No matter what, it would be heartbreaking to lose an item like that. They can at least feel whole by having enough insurance.”