According to the World Wealth Report 2010, luxury goods and collectibles investments are on the rise. American art auction sales have shown a robust rebound since a dramatic downturn in 2009, which has increased the need for specialized insurance coverage.
“There are insurance companies for high net worth individuals such as Chubb, Chartis, ACE and Farmer’s Fund who offer policies specifically for luxury items,” says Jeanne Salvatore, spokesperson for the Insurance Information Institute (III)
Luxury goods, such as yachts, fine art collections, and vintage wine cellars require more than the typical insurance coverage.
The III suggests contacting your insurance agent to find out the potential value of the items in question because there is usually a dollar limit on insurance coverage for items including art collections, wine, furs and jewelry.
A crucial step in the process is getting the item appraised for the dollar value. Your premium will be based on the appraised or market value of the collection or item, which highlights the importance of hiring a competent appraiser.
According to ACE Private Risk Services for high net worth individuals, 40 percent to 60 percent of consumers have no valuables insurance coverage for gold and other expensive items. In 2010, 83 percent of insurance agents noted that the priceless collectibles of affluent consumers were likely to be under-insured.
Rich Haynie, president of Rich Haynie Insurance, a specialty insurance agency that provides boat coverage, says a yacht is an investment that requires more than the basic boat insurance coverage. Insurance companies define a “yacht” as a boat that is more than 27 feet in length.
“People are leaving themselves exposed to very expensive risks if they do not seek more than the minimum coverage. Coverage varies depending on the size and age of the boat, navigation limits (where are you taking it) and the experience of the captain,” Haynie said.
The amount a person pays for insuring a yacht is based on the purchase price of the boat, any additional equipment you purchase for the boat and taxes.
On average, yacht owners can expect to pay anywhere from $5,000 to $10,000 per year for yacht coverage, Haynie said.
Salvatore reports that coverage is available for the full value of the item in case a catastrophic event occurs. Heaven forbid your nephew chucks baby food at your original Van Gogh painting or a friend decides to take your yacht out for a joy ride.
“The elements of coverage are standardized,” Salvatore said. “Getting coverage for physical damages, theft and liability are all elements that are needed to make sure you are covered.”
ACE Private Risk Services reports that the annual rates for valuables such as jewelry are typically $1 to $2 per $100 in value depending on where the items are insured. Taking out a safety deposit box can be five to six times cheaper to insure jewelry stored at a bank than at home.
It is crucial to keep your insurance agent updated on appraisals because fine art, wine and gold fluctuate in value. Now that you have invested in such luxurious items, protecting that investment is the next step.
“The reality is that the insurance product serves to protect them [high net worth individuals] financially. If you’re financially savvy, you want to protect that investment,” Salvatore said.
As luxury goods and collectibles investments are on the rise, so is the demand to insure them. Discuss your options with an insurance expert so you know how to protect them properly.