But insurance of items with legacy should not be overlooked
High value wine and diamond collections with their origins in nobility – which attract the fascination of the world’s wealthiest collectors and ordinary citizens alike – are in the spotlight.
An unopened bottle of wine from 1821, which was originally destined for French Emperor Napoleon Bonaparte, was sold for a record-breaking price of R967 300 at an auction in South Africa recently. It is estimated that only 12 bottles of this rare wine still exist today. The jewellery of Marie-Antoinette – who reigned as the French queen in the 1700s – is going under the hammer in Geneva on 9 November, and with bracelets consisting of 112 diamonds, they are expected to fetch between $2 and $4 million.
But collectors are being cautioned to not overlook the importance of insurance when investing in unique pieces.
“While the sentimental value or uniqueness of the item cannot be replaced in the event of a loss, insurance can put the collector back in the same financial position prior to when the loss occurred,” says Tarina Vlok, general manager at Elite Risk Acceptances, a high-net-worth insurer and subsidiary of Old Mutual Insure. “Given the huge financial outlay to get ownership of a unique item, insurance is critical for collectors to protect against potentially being out of pocket.”
Protecting collectible assets that come with history, heritage, and legacy
Vlok says that while typical domestic policies are designed to cover a home and what’s inside, there is sometimes limited coverage for valuable possessions – such as jewellery, fine art, wine and spirits, and antiques – that may get lost, stolen, or damaged.
“Speak to your clients to find out what is the best way to accommodate high value items,” says Vlok, adding that it makes sense to work with a specialist insurer who understands the market for high value items, as not all insurance policies are created equal.
She says that there are significant risks that collectors face when purchasing one-of-a-kind pieces, including damage during transit if purchased at auctions, or from events like fire or water, or even theft.
“For example, antiquities sometimes come into the market illegally or are bought on the black market and sold to an innocent and unknowing collector. If the collector has to give it back to the legal owner, a specialist high net worth insurer may compensate the client a portion of the loss.”
What to know about insuring rare items
The first step for collectors is to get the item appraised by a specialist.
“Professional appraisers, who use a wealth of technical data and specialised information to determine the replacement value of rare items or collections, are essential to help investors adequately insure their collections.”
She adds that the value of a rare asset is influenced by various factors, including exchange rates, global trends as well as whether or not the item’s investment class has grown.
It is important that these items are insured on an agreed value basis, where collectors and insurers mutually agree the replacement value before a loss occurs. This agreed value forms the basis of the compensation in the event of a loss. The insurer will try to source the exact item in case of a loss, but if it turns out to be irreplaceable, the insurer would compensate the insured financially for the loss based on the agreed value.”
Below are Tarina’s top tips for insuring special and collectible items:
- Get an appraisal of rare items from a specialist appraiser. If the item is a valuable piece of jewellery, don’t spare the cost of obtaining a specialist valuation certificate.
- Consider the influence of inflation and other market forces, and have the appraisal reviewed regularly, at least every three years.
- Unique items have more value than the sum of their parts, so it makes sense to treat them as such. For example, if you have collected specialised pieces that the rich and famous once touched, like the jewellery of Marie-Antoinette, and you need to replace a clasp that may have broken, do not take it to any jeweller. Work with a specialist who knows how to handle these rare items.
- Always pack and protect items in accordance with their value.
- If purchasing the item at an auction with a future delivery date, find out who would be liable in the event of a loss during transit from the auction house. In other words, find out if “in transit” cover needs to be arranged under your client’s policy or that of the auction house.
- Make sure to take adequate steps in keeping an item safe. For example, for collectible jewellery, a specialist insurer may require a client to keep it in a safe at home. If these items are kept in a bank vault, the premium will be lower, but the insurer may require notice every time it is removed it from the bank vault to wear.
- Storage is also very important. Wine must be stored in a temperature-controlled environment. Specific risk coverage can protect against power interruptions, especially if there is no inverter or generator to keep the wine cellar cool during power outages. Similarly, the insurer may require that rare book collections must be kept in a waterproof display cabinet to ensure protection against water damage.
- Speak to your clients about the best options for insuring their high value item, because not all policies are created equal.