Protect Your Valuables With These Best-in-Class Strategies

FEBRUARY 9, 2021

Homeowners’ insurance policies typically have coverage limitations for valuable items such as jewelry, fine art, furs, antiques, silverware, wine, wearable art, guns and memorabilia. While some homeowners’ policies insure valuables against fire, there is often little to no coverage for stolen or lost items.

Unfortunately, many people discover this critical coverage gap in the most desperate of times: when they file a homeowners’ insurance claim. For individuals who own valuable items, including avid collectors, such occurrences can mean thousands of dollars in uninsured losses, on top of the stress of losing items of sentimental value.

At USI Insurance Services, the Personal Risk Services team has been advising clients on ways to mitigate these financially distressing events. Working closely with clients, we identify exposures that exceed the limits within the homeowners’ policy for valuable items, create inventory, and establish values for all collectibles eligible for scheduling. Also, we design coverage for collections and recommend methods to mitigate potential losses in the event of a claim.

Itemizing vs. Blanketing

Our clients commonly use scheduling or itemizing to insure their valuable collections. While blanket coverage covers a group of items, scheduling involves creating a specific list or “schedule” of valuable articles, and itemizing the replacement cost and description of each piece to be insured within the collection. This allows the client to insure each item at its exact value. It also permits the client to segregate high-value items that exceed the homeowners’ sub-limits and obtain broad coverage with enhanced protection for those items.

The benefits of scheduling jewelry are:

• Worldwide coverage, whether the item is being worn, in transit, or in a safe
• No deductibles, so you don't have to pay to have your piece replaced or repaired
• Automatic coverage for newly acquired items
• Coverage for pieces on loan or consignment typically with prior approval
• Increased coverage due to market appreciation
• Coverage for theft and mysterious disappearance

Managing the Value of Your Collections

Cost of jewelry has risen in the past several years, and so has the volume of lost and stolen jewelry. In North America alone, $1.5 billion of jewelry is lost or stolen every year. Typically, insurance companies will require appraisals to validate the item, substantiate the value, and create a description used in the event of a loss. If and when a loss occurs, certain specialty carriers offer clients 100% of the insured value, without requiring any deductible or factoring in the effects of depreciation.

USI’s risk assessment process includes a review of the policy and underwriting requirements, as well as valuation clauses in the policy. We also advise clients on frequency of appraisals and the criteria for a qualified and professional appraiser.

Take the case of one of our clients, a family going on vacation. One family member posted on social media that they were leaving for a three-week trip to Europe. Days after the family had left, their home was broken into — and all of their jewelry, except for the wife’s wedding ring, was stolen.

Fortunately, a USI personal risk advisor had already reviewed the client’s jewelry, placing $50,000 of scheduled jewelry coverage for three pieces, and $25,000 of blanket coverage for the remaining jewelry. As a result of USI’s review and placement of both itemized and blanket coverage, the family was able to collect $40,000 for the scheduled jewelry and $20,000 for the unscheduled jewelry or blanket coverage, saving them an out-of-pocket expense of $60,000.

Market Trends During the COVID-19 Pandemic

Jewelry availability and sales were down in 2020. However, the market for colored diamonds has remained strong. The overall decrease in transactions is due to supply chain delays caused by the pandemic, which have greatly impacted how and when objects are brought to market and made available for public consumption.

Pre-pandemic, individuals who had traditionally spent money on experiences, such as vacations, concerts and entertainment, are now opting to spend more on jewelry instead, and many are choosing larger carat sizes. The considerable amount of time many people now spend on screens has had another drastic effect on jewelry sales, which the industry has been calling “the Zoom phenomenon.” Ring sales overall are down, but there’s been an uptick in necklace and earring sales (items that can be more easily seen on Zoom calls).

Due to COVID-19, collectors have transitioned from attending in-person shows or bidding at auction to buying exclusively online or in a private retail setting. When making these types of transactions, it’s imperative that buyers complete ample due diligence, proceed with caution, and arm themselves with as much market knowledge as possible before greenlighting a significant purchase.

For engagement- and wedding-related purchases, couples who tied the knot in 2020 cut down on guest, food, flower and party favor spending, but continued to spend on bridal jewelry. Since the onset of the pandemic, 70% of all custom diamond rings have been sold via virtual shopping.

According to the Wall Street Journal, millennial buyers boosted sales of pink and blue diamonds, vintage timepieces, rare whiskies and wine, as well as luxury handbags. Pink- and blue-hued stone sales have increased by about 10%. On the whole, the millennial generation is building and inheriting wealth at a faster rate than previous generations. This, coupled with a willingness to buy sight unseen (online, via an app or over the telephone) has increased acquisition rates in the luxury market.

Best-in-Class Strategies for Valuables

Valuable article policies differ by carrier in terms of requirements and exclusions. Therefore, it’s essential to work with a risk management partner that understands the valuable’s insurance space, especially the different coverage types, policy limits and restrictions. For example, it’s important to know if a valuables policy would pay a percentage more than the amount scheduled as protection against price appreciation. This is critical, given how rapidly the value of precious metals can change within a relatively short period.

Certain policies require jewelry appraisals to be kept up to date and also provide the insured access to specific appraisers. In some cases, policies require appraisals for items with values as low as $5,000 and as high as $50,000. Generally, while it’s best to re-appraise items every three to five years, USI recommends that in times of market volatility, clients should consider updating values more frequently, even if it is not required by the carrier.

Collectors and owners of valuable items should consider the following additional information:

• Certain carriers offer discounts for valuables kept in a safe or vault.
• Some insurance carriers restrict coverage for items in transit, and require notification and approval in order to retain full coverage.
• For a lost item that’s part of an itemized pair or set, such as earrings, certain specialty carriers will provide coverage for the entire set if the carrier is provided with the remaining piece(s).
• Transporting insured collectibles often requires specific packaging and handling to avoid suspending coverage. USI experts can assist with vetted resources, including professionals who specialize in transporting insured collections.

To analyze our client’s personal exposures and challenges, our personal risk team leverages the USI ONE Advantage®, a fundamentally different approach to risk management. USI ONE® integrates proprietary business analytics with a network of local and national technical experts in a team-based consultative process to evaluate the client’s personal risk profile and identify targeted solutions to address those risks. Clients then receive tailored recommendations for more efficient investment of premium dollars through customized personal insurance risk management programs that enhance coverage and manage rate control.

Ultimately, the most important advice from our team: Don’t leave coverage for your valuables up to chance. Work with a knowledgeable personal risk professional on how to best protect your collection. The investment will pay off when you need it most.

For more information, contact your USI personal risk advisor or visit www.usi.com.