Wrapped in Love: Ensure Your “Passion Investment” is Protected

Love is in the air! February is known as the month of love, especially with Valentine’s Day on the 14^th. It’s the special time of year when many of us show our love and affection to loved ones through thoughtful gifts of chocolate, flowers, and a nice dinner out. Successful individuals may show their love with a grander, heartfelt gesture by giving the gift of a passion investment.

Passion investments are high-value, unique, or collectible gifts. These gifts are often considered assets, and their values can fluctuate over time. Passion investments may include:

• Precious jewelry: Diamonds, gold, colored gemstones, and other unique stones and metals
• Unique fine art and antiques: Paintings, sculptures, and historical artifacts
• Luxury watches and clocks: Timepieces from renowned brands that often appreciate in value
• Rare whisky and wine: Noble wines of Bordeaux and Burgundy and even New World bottlings
• Exquisite collectibles: Coins, stamps, vehicles, designer handbags, vintage toys, musical instruments, and furniture
• High-end electronics: Premium gadgets that may have a high resale value

The value of these passion investments and the risks of owning them vary as widely as the passions themselves. Because they may have sentimental value as well as intrinsic economic worth, you should consider the extent of insurance protection needed when giving such a thoughtful gift, as one insurance policy may not typically fit all needs and exposures.

Passion gifts require passionate insurance approach

Standard homeowner policies can protect traditional gifts against loss, theft, or damage, but more expensive, high-value gifts like jewelry and luxury watches could exceed the amount your policy will cover for personal property. Automobile policies that cover vehicles driven daily generally will not provide appropriate coverage for vintage or collector vehicles. A fine art policy may not protect against all incidents—such as deterioration (disintegration, fading, or warping) of works. Imagine giving your loved one a beautiful, rare gemstone necklace or a unique work of art this Valentine’s Day, only for it to get lost or stolen shortly after. The emotional impact of losing such a meaningful gift can be devastating, not to mention the financial hit.
 

In a recent study, 43% of high-net-worth individuals were found to have valuables that were uninsured or underinsured.

That’s why it’s important to review the value of your gift and approach your insurance strategy with the same passion. Often, a recommended option is to have separate, customizable policies specifically for the exposures of each passion investment. Such policies may include:

Valuable articles insurance: This type of insurance generally provides broader loss coverage for rare and unusual items and offers the option of blanket or scheduled coverage. Under blanket coverage, one limit applies to the covered items. With scheduled coverage, you can list specific high-value items for coverage, ensuring they are all fully protected. 

Collector vehicle insurance: Vintage vehicle insurers understand that collector vehicles often appreciate, and it’s important to establish their value. Because they’re not driven frequently, accidents are less of a risk than damage such as vandalism or theft. Many collector vehicles are more expensive to repair than their resale value, so you’ll need to recognize that damage claims can only be paid up to the agreed value under a collector auto policy.

Personal articles floater: This is an add-on to your homeowners insurance that provides coverage for specific items, often including worldwide coverage. So, if you take that luxury watch on a trip abroad and something happens to it, you’re still covered.

Specialty insurance: Some companies specialize in insuring high-value items, offering tailored policies that cover unique risks associated with collectibles, art, and jewelry. This means you can have peace of mind knowing that your treasures are protected against loss, theft, or damage.

Excess liability/personal umbrella insurance: Liability exposures are rising for many families and individuals due to legal and social trends. Having adequate liability coverage for third-party losses related to high-value items, such as loaning the gift, is important protection.

The benefits you should look for in your specialized insurance policy(ies) should include:

• Replacement value coverage (vs. actual cash value coverage)
• Automatic coverage for newly acquired items
• Broad coverage terms, such as breakage, mysterious disappearance, increase in market value up to 150% for individually itemized pieces, the choice to repair or replace, and coverage for items on loan or consignment
• Worldwide protection
• Diminution of value for pairs or sets
• Risk management tools to mitigate loss

11 tips to minimize a broken heart

In addition to securing appropriate insurance for your gift, there are some ongoing risk mitigation tips you might follow to protect the investment of your gift (and minimize a broken heart if the gift is damaged, lost, or stolen), including:

1. Get your item appraised at least every three to five years by a certified appraiser to verify its value and authenticity.

2. Keep robust documentation for your gift, including all images, appraisals, receipts, and insurance information.

3. Invest in quality storage, such as a safe deposit box, safe or locked cabinet. Ensure the storage area is dry, cool, and free from humidity and other elements to prevent damage.

4. If you choose to keep your valuable item in a safe deposit box or other approved storage, please advise your insurance broker when the item is removed or transported.

5. Use protective cases for items like jewelry, watches, or collectibles to help shield them from dust, scratches, and accidental damage.

6. Schedule regular maintenance for items that require it, such as luxury watches, fine art, or collector vehicles, which will help preserve their condition and value over time.

7. Use gloves to prevent oils and dirt from transferring from your hands, especially for items made of specialty glass, high-tech screens, and fine art.

8. Enhance the security of your home with alarm systems, surveillance cameras, and secure locks to deter theft and provide added peace of mind.

9. Ensure safe handling when transporting or moving your gift by hiring qualified and insured packers, shippers, and installers.

10. Make a disaster plan that includes who will secure the item during the possibility of evacuation and in the event of a catastrophe.

11. Review insurance coverage and update it regularly to ensure it remains adequate, as your gift’s value may change over time.

Engage with an experienced high-value risk advisor

It is important to work with an experienced and knowledgeable insurance and risk advisory professional who understands the complexities of insuring these high-value gifts of passion investments. Look for an advisor who can help you understand the risks associated with your gift, refer you to reputable appraisers, and help you secure appropriate coverage.