Many policyholders impacted by the Northern California fires lost valuable art and wine collections along with their homes. Others are now questioning whether they have enough insurance to protect against the loss of their collectibles. Insureds need to be scrupulous; you cannot expect a standard policy to provide the coverage you need.
The typical homeowner’s policy provides coverage for both the structure and the contents. But luxury items like art, wine, and jewelry are subject to special sub-limits of insurance. These sub-limits are typically very low, ranging from $1,500 to $10,000. Homeowners can request higher limits, but when they do so they typically need to tell the insurance agent what specifically they are insuring and demonstrate the value of the item ahead of time. Most people recall doing this when talking to their agent about their wedding ring.
Making a claim for the loss of a valuable item like wine or art under a standard policy may prove challenging even if it was specifically added. Insurers typically reduce claim payments on property by depreciation, a concept that does not apply to things like wine and art, which unlike other property increase in value over time. Thus, you may find yourself stuck arguing with your carrier about the actual value of your collection – something hard to prove. As another example, your policy might contain a spoliation clause that excludes coverage for wine ruined by extreme changes in temperature.
The better bet is to get a specialized policy for these items. Collectibles policies will provide coverage for all your wine, art, jewelry, and the like, and they will provide broader protection. For example, a standard homeowners policy does not cover earthquake damage, so if your wine breaks or art falls during an earthquake, you are not covered. A collections policy will provide coverage in that scenario. Additionally, most collections policies apply a formula to automatically account for increases in value, so there is no fighting. They also often insure collections as a whole, as opposed to single pieces, so new items you add are automatically covered.
If you are unsure if you have the right coverage, check your policy. If you have only a standard policy, look for riders and endorsements that specifically address these kinds of items. You can review our article on how to read your policy to help guide you through the process. You can also call your insurance company or broker to inquire about any additional insurance for these purposes you may have purchased.