‘Tis the season of giving — and high-value gifts
Consumers were projected to spend more than $720 billion over the holidays this year, according to the National Retail Federation. While the majority of that spending likely falls into the stocking stuffer category, The Robb Report listed a $6 million pair of pear-shaped Jacob & Co. earrings on its “Ultimate Gift Guide” this year. And the coveted Neiman Marcus “Fantasy Gifts” list for 2018 included a custom animal sculpture of a favorite pet valued at $200,000 and up among other luxury gift ideas.
Protecting your high-value holiday gifts, including jewelry, art and collectible sports memorabilia, against potential disaster or theft requires expert advisement. While some individual items may be covered under the contents portion of a traditional Homeowners policy, a Personal Articles Floater (PAF) policy goes further in ensuring these items are covered at market value.
A Personal Articles Floater policy is in place so that you can be sure an item or a large collection of items are reimbursed for the full loss.
“A PAF policy has no deductible and very few exclusions,” said Bill Gatewood, Corporate Vice President, National Practice Group Leader, Personal Insurance, Burns & Wilcox, Corporate Headquarters. On the other hand, there may be multiple exclusions in a Homeowners policy, so certain high-value items may not have any coverage.
“A PAF is in place so that you can be sure an item or a large collection of items are reimbursed for the full loss,” Gatewood said. “It serves as protection in case something like a fire, flood or theft occurs.”
In order for contents to be covered under a Homeowners policy, the cause of loss has to be a covered loss under the policy, Gatewood said. Otherwise, no coverage trigger is pulled. “Homeowners policies also have built-in sublimits for specialty items, so even if the cause of loss is covered, you will not get coverage for the full value,” he added.
Appraisals, documentation crucial
A PAF policy requires one or more appraisals from a validated source, who is a recognized expert in the industry, whether for jewelry or another category. For collectible items, a respected pricing guide such as Beckett for sports cards or Steiner Sports for national items will suffice for that appraisal.
There is no standard baseline value where a PAF would be recommended, but a minimum premium cost might be in the $200 range, Gatewood said.
Complete documentation is key. You don’t want to be in a position where you have to prove a higher value of an item after it is lost or damaged.
If your favorite gift added to a growing collection of art or memorabilia, it’s crucial that the new item be appraised right away.
“Complete documentation is key,” Gatewood said. “So is scarcity of the item. You don’t want to be in a position where you have to prove a higher value of an item after it is lost or damaged.”
A person should actively list every item in their collection that they believe should be insured, Gatewood said. This documentation should include detailed descriptions of any items, the source of the appraisal, proof of item quality and other details. These line items are critical to establishing an accurate profile, Gatewood said.
Additional coverage can help for market fluctuations
The market for collectibles and other high-value items can fluctuate regularly. Having a PAF can help mitigate changes in the value of collectibles, while protecting your investment against unforeseen circumstances. Even though many sports cards have seen depressed values, the 500 most valuable “vintage” sports cards have far outpaced the S&P 500, according to the PWCC Top 500 Index.
These high values are one reason a Market Appreciation endorsement is a sensible option for some collectors. This endorsement is either built into the policy itself or is part of optional coverage that can be purchased. It can account for positive fluctuations of one or more collectibles so that such items are less likely to be underinsured. For example, a $10,000 item that appreciates by 50 percent might pay out at $15,000 if it is lost or damaged under a market appreciation endorsement for a small extra fee of a few hundred dollars, depending on the item or items, Gatewood said.
Fluctuations happen in other collectible markets as well, and during a time of low interest rates and a volatile financial market, some consumers around the world consider stamps, classic cars, art, wine and the like as an investment, further creating a need for such collections to be insured.
The cost for a PAF might be around $500-$600 per year on average for an item valued at around $70,000, Gatewood said. That annual cost can rise or fall based on how well the item is secured. For example, if a collector tries to sell a $70,000 item, by taking it on the road to auctions, the annual cost of a PAF could be a few hundred dollars higher. However if the collector secures the item in a safe deposit box for the year, the cost could be significantly less.
Insurance costs per item can be smaller if you have multiple items in your collection, but that’s not a hard and fast rule, Gatewood said, based on the rarity and condition of individual items, and whether those items are kept in one location or moved around. He recommends reaching out to an insurance broker or agent to price a PAF that meet your needs as individual policy estimates vary. After all the only thing better than a thoughtful gift this holiday season is the peace of mind in knowing that high-value gift is protected.
“Based on the opportunity for that item to be stolen or damaged, your cost (for a PAF) will also fluctuate,” Gatewood said. “Every collectible, and every collectible industry is different – it’s like comparing apples to oranges. So you want to work with a broker to uncover options.”
As with any coverage need, an insurance broker or agent must be consulted. Click here to forward this article to your insurance broker or agent to ask if you need this coverage, or share this with clients to start the conversation and ensure proper protection.
This information was provided by Burns & Wilcox, North America’s leading wholesale insurance broker and underwriting manager. Burns & Wilcox works exclusively with retail insurance brokers and agents to assist clients like you with their specialty insurance needs. Ask your insurance broker or agent if a Personal Articles Floater policy is right for you.