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Insuring Your Valuables Can Be Risky Business

Photo of author, David Wilcox II, CPWA®.
David Wilcox II, CPWA®
Associate Financial Strategist

Whether you consider yourself a collector or not, there are likely things that you own which hold a special place in your heart, items that may also be of considerable monetary value. Is it a special painting handed down through generations of your family history, a classic car with all original parts, or maybe it’s a collection of fine jewels or wine? Whatever the item, one thing is for certain — assuming that your valuables are covered under the terms of a general homeowners insurance policy is risky business.

Here is the dilemma: Most insurance contracts limit or exclude coverage for artwork and collectibles, often placing a $1,000 or lower limit on such valuables. A common practice to add additional coverage is scheduling out specific items that you wish to insure. In most instances, this solves the problem; but let’s consider this example:

You have inherited an antique World War II officer’s pistol from a family member upon their passing. In its current condition, an appraiser values the pistol at $2,000. But after consulting with a military historian, government records prove that the pistol was issued to a decorated war hero who carried the pistol on the beaches of Normandy on D-Day. The historian issues you a letter of his findings and now appraises the pistol at $7,000. The provenance of the item — its historical background — is actually worth more than the item itself!

Now for the $1 million question: If that pistol is lost or stolen, are you (the owner) reimbursed $2,000 for the actual value of the pistol, or $7,000 because of the historical significance of that pistol? It depends!

Generally speaking, if you just have a basic homeowners policy covering that item, you will receive the pistol’s replacement value, or $2,000. However, if you explored the "valuable articles" insurance market and purchased coverage based on the pistol's historical value, you would be reimbursed $7,000.

The key takeaway? In reviewing insurance coverage for your valuables, make sure coverages and policy specifics align with the unique risks that your items face. Consult with a professional insurance agent. As collecting various types of tangible assets has garnered more interest over time, the insurance industry has adapted with tailored solutions for specific types of collectibles. A handful of insurance carriers have begun offering “bespoke coverage” for not only loss and theft, but also asset-specific concerns, such as spoilage of wine and coverage of jewels or artwork that are on loan or lease, just to name a few.

Of course, from a wealth management perspective, valuables and precious items or collections are all important elements of one's portfolio of assets. Although we do not sell insurance, McKinley Carter advisors can help you take the next step if you ever have questions about item valuations and worth.

“If you don’t know, ask. You will be a fool for the moment, but a wise man for the rest of your life.” — Seneca the Younger

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