One of four people in the southern U.S. incorrectly believes that flood damage from a hurricane is covered by homeowners' insurance, according to 
recent research from the Insurance Information Institute. That is a serious gap in policyholder insurance knowledge that agents—especially in Florida—continually struggle against.
It is made worse by another common gap: Policyholders thinking that their valuable possessions such as collectibles are adequately covered by their homeowners' or renters' policy.
In reality, valued possessions are often inadequately insured by the contents' coverage of a homeowners' or renters' policy. For example, a homeowners' policy may have a $2,500 sub-limit (after deductible) for collections. The typical claims adjustment process would appraise these items at actual cash value. For a collector with a garage decorated as a vintage gas station or a dollhouse furnished over a 40-year period, a $2,500 check will underinsure the loss by thousands—maybe tens of thousands—of dollars.
The result is unhappy clients whose dissatisfaction grows worse when they learn they could have more appropriately insured a collection with a stand-alone collectibles' policy.
A specialty collectibles' policy is different from a personal articles floater or valuables' insurance for high-valued, appraised items such as jewelry, fine art, furs, and other items; those types of coverages might still be warranted, especially in high-value homes. Specialty Policy Provides Broad-Based Protection
Insurance agents can help prospects and clients protect their possessions by asking two simple questions:
- Do you own any valued collections?
- What do you estimate their value to be?
Such questions can start a discussion that ends up enhancing the customer-broker relationship, because often those collections are the most-prized items the customer owns.
Additionally, agents protect themselves from liability by alerting the customer to the availability of the coverage.
The discussion also properly sets expectations about the restrictions on coverage in a homeowners' insurance policy. Selling a collectibles' policy can be an add-on sale to a homeowners' policy. Premiums vary by the category of collection being insured, from $4 to $12 per $1000 of coverage. Unlike personal articles floaters, most insurers do not require appraisals or inspections for a collectibles' policy.
The coverage is more broad-based than the standard homeowners' policy perils of fire, lightning and windstorm. Collectibles' policies typically cover accidental breakage, flood, theft, hurricane, earthquake, water damage, and mysterious disappearance. They will also cover multiple collections in a home. For example, the husband's Lionel train collection and the wife's Lladro figurine collection can both be covered under one policy.
The key distinction with a collectibles' policy, though, is agreed value coverage. Collections are insured for their full collector value (including accessories such as product packaging), without depreciation. Some carriers also offer automatic increases in scheduled item value on a quarterly basis.
The traditional approach of using insurance that depreciates in value (actual cash value coverage) could expose clients to loss and agents to liability. With hurricane season upon us, the time for Florida agents to bridge the coverage and knowledge gap with their clients is now.
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