Insuring Collections

Xiliary Twil of Art Asset Management Group, Inc. sent me a very good article from Wealthmangament.com about insuring collections.

As I have mentioned in the past, we are seeing more and more articles on collecting and insurance reinforce the need for a qualified appraiser.  The Wealth Management article notes items should be appraised and then re-appraised every 3 years.  It also notes to use qualified appraisers and recommends using ISA, AAA or ASA appraisers.

Wealth Management reports

There are two ways to get more coverage, McCarthy suggests. The simplest and usually least expensive is to buy an endorsement that will upgrade the policy. Most insurers offer them, marketed under various names. An enhanced homeowners policy might give you $5,000 of protection for jewelry and furs, $5,000 for silverware, and some coverage for antiques and fine arts.

Clients wanting more coverage may need to buy a policy rider. “Scheduling” your valuables for insurance purposes not only provides higher insurance limits, but also covers nearly all causes of loss. A basic homeowners policy is limited to specified causes, such as fire, windstorm and theft.

To schedule an item, the client typically must provide an insurer with an inventory of items that have been valued by an appraisal, a bill of sale or statement of replacement value based on the current market price. Insurers generally want scheduled items reappraised every three to five years.

Appraisals should come from qualified professional appraisers, like The American Society of Appraisers (www.appraisers.org), The Appraisers Association of America (www.appraisersassoc.org) and the International Society of Appraisers (www.isa-appraisers.org).

While costs vary, scheduled jewelry typically costs $12.50 per $1,000 of value, so a $2,000 ring can be protected for $25 a year.

The same insurance company that insures a client’s home generally will schedule any item. However, if a client has something extremely valuable, like a $250,000 concert grand piano, they may need to turn to “surplus” lines or “non-admitted” companies, like AIG and Chubb. Together these insurers had more than $5 billion in estimated sales of high net worth coverage in 2012.

These two companies offer a suite of products, including coverage for the replacement cost of the home, along with coverage for autos, yachts, art and antiques. Also, they provide excess liability insurance to protect against claims of personal injury or property damage.

Compensation to registered representatives and financial advisors for insurance referrals can be attractive. Reps with property and casualty insurance licenses can share in property-casualty commissions, which can total 15% to 20% percent of annual premiums for new business and renewals. Property-casualty agents often will share with licensed reps.

Source: Wealth Management