Tuesday, July 23, 2013

Protecting Your Investment

QUESTION: I’ve been collecting antiques and such for a number of years. Do I need extra insurance or will my homeowner’s policy cover what I have?

ANSWER: As a collector, you’ll want to take care to see that your treasures are adequately insured. And even if you have coverage, you may find that coverage you purchased several years ago leaves you financially vulnerable today.

Most collectors use one of three types of insurance—that found in a standard homeowner's policy, special endorsements to that policy, or a "floater" policy for valuables such as art and antiques.

The policy that covers your home includes insurance for your personal property as well as the structure it's housed in, usually at 50 percent of the amount of coverage for the dwelling. This means that if you have insured your house for $150,000, your belongings are protected for up to $75,000.

Is this amount sufficient for your collection as well as all your other belongings? That all depends on what your collection contains. If you have a small collection of "collectibles" or less expensive items, the coverage in your homeowner's policy is probably enough. But keep in mind that standard policies usually fix limits on certain types of items such as currency, documents, silver, and jewelry. You should read your policy carefully to see if these limitations affect your collection.

The coverage in homeowner's policies is "unscheduled," that is, it groups all of your goods together rather than listing and valuing them separately. Should a theft or fire occur, it’s your responsibility to prove ownership and the value of the items in your collection. The insurance company will then calculate your losses on the "actual cash value" of those items, figuring in depreciation. If you collect anything other than certifiable antiques, complications can arise over the settlement.

Your insurance company may deem "old and worthless" items you consider “vintage.” So you should keep receipts and other records, especially for less expensive "collectibles" and offbeat items—be sure to print out receipts for anything you purchase at online auction sites. Though claims adjusters are usually on target, any documentation will help —the more the better.

Even if you decide to work within the limits of your standard homeowner policy, you may find that increased coverage is necessary. While that $75,000 may sound like a lot of insurance, you’d be surprised how quickly the normal, everyday contents of a house add up, leaving only partial coverage of your losses.

To remedy this problem, most policies offer the option of a special "endorsement" which allows for a higher percentage of personal property coverage for an additional fee. If you have a collection of any size or value, you’ll probably want to take inventory of your home's entire contents to see whether you should purchase such an endorsement.

Finally, you can also purchase a separate policy to cover valuables such as art, antiques, silver, and the like. And in this case, silver means Sterling, not plate. These policies, known generally as "floaters," cover "scheduled," or listed, items. Each item is listed separately with its own value, usually by means of a written professional appraisal. Those cheap or free online appraisals just won’t do. The benefits of floaters are that each items is covered for its full replacement value because ownership and value are  pre-established, In addition, most floaters will protect the collection against loss as well as theft, a benefit not available through most homeowner's policies.

The cost of such a floater will of course depend on where you live and what you’re insuring. Very portable items of recognizable value command the highest rates. For instance, the amount for jewelry is always higher than for artwork. Prices may also be lower if you store your collection—or part of it—in a safe or safety deposit box, or if your home has a security alarm system. If your collection is worth more than $50,000, your insurance company will probably insist that you install such a system.

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