Special Gifts Require Special Attention

N/ABabies. Furbys. Jewelry. Fine art. Antique dolls. Precious Moments. Collectors' plates. Fur coats. Hummel figures. Rare coins. Autographed footballs. Golden Books. Depression glass. Baseball cards. Department 56. What do these items have in common? They're all hot holiday gifts. However, they all may not be covered by a homeowners or renters insurance policy.

Agents should let customers know that if they are giving or receiving a valuable or collectible gift this year, they could be at risk for a major loss if not properly insured.

"Standard homeowners insurance policies are not intended to protect fine art, jewelry, antiques, collectibles or any items that tend to appreciate in value, only the everyday items in your home—furniture, clothing and appliances. Therefore, they limit coverage for unusually valuable items," says Madelyn Flannagan, <%=company%> (IIAA) manager of consumer information services. Homeowners and renters policies also typically exclude coverage altogether in certain situations, such as floods, earthquakes, accidental breakage or during shipping.

So, how can someone know if they are underinsured? A typical homeowners policy includes 50% of its policy limit in contents coverage, meaning that a $100,000 policy would include $50,000 in coverage for personal belongings, Flannagan explains. "If the value of an individual item or collection exceeds 10% of the total value of all your other insured possessions—$5,000 in this scenario—you probably need additional coverage," she says.

That additional coverage, says Flannagan, typically comes in the form of a separate personal articles floater or fine arts policy. Coverage costs about $1.25 for every $100 of property insured. Floaters generally have fewer exclusions and let insureds name the amount of coverage needed to insure a collection.

Unlike most household items, Flannagan continues, collectibles should not be insured for their actual cash value—the item's original cost minus depreciation.

Otherwise, the Beanie Baby bought last year for $5.99 may be valued at only $2.50 in an insurance claim if it is destroyed in a fire next year, even though it may be worth much more. Rather, she says, insure collectibles at their replacement cost—the price to replace the items with comparable ones—or a stated value, an agreed-upon amount based on book price, secondary market value or appraisal.

So, what items are candidates for a personal articles floater? IIAA says anything that is excluded from replacement cost coverage under a homeowners policy, such as "antiques, fine arts, paintings and similar items of rarity or antiquity that cannot be replaced" and "memorabilia, souvenirs (and) collectors items ... whose age and history contribute to their value," as well as jewelry, furs, firearms and other expensive items.

And don't forget about those popular kids' items that may increase in value over time. Today's nostalgia craze is fueling prices on things not thought of as collector's items just a few years ago, including metal lunch boxes, Matchbox cars and vinyl records. Hold on to those potentially lucrative items, says Flannagan, but don't forget to record their value over time to ensure the proper coverage to protect the investment.

Most homeowners and renters insurance policies limit coverage for valuable possessions to $1,000 - $2,500 per item or collection and offer even less protection for travelers. What can someone do to ensure an investment remains

secure? These guidelines help:

• Individual items or a collection worth more than $1,000 probably require additional coverage. A blanket policy could cover an entire collection for a stated amount. Items worth more than $2,500, such as engagement rings, generally must be insured on their own policy.
• A policy should insure a collection for replacement cost or a stated value based on book price, secondary market value or appraisal, rather than actual cash value.
• Policies that exclude coverage in cases of accidental breakage, flood or other events aren't appropriate. An "all risk" policy covers every potential hazard.
• People in the collecting business must purchase business insurance to protect inventory. Homeowners policies limit coverage for business losses.
• All purchase receipts and supporting ownership documentation should be kept in a fireproof box.
• A detailed inventory of items and their values, even if the insurer doesn't require it, is valuable.
• Written appraisals should be updated every year or two.