Does Your Insurance Policy Cover Collectibles?

By the Mercury Team

During the past couple of years, a renewed interest in hobbies has exploded with consumers from coast to coast.

One popular hobby gaining traction is collecting goods such as watches, sports cards, musical instruments and sneakers. Some collections have seen their values increase dramatically over the last several years.

“A collection is a form of investment, requiring time, money, and great care to curate and maintain,” said Mercury Insurance Product Manager, Adam Bakonis.

“Protecting one’s belongings from the unexpected can bring you, and the effort spent collecting, a much needed security blanket.”

Some newfound interests that have sparked a dramatic increase in value in recent years:

Sneakers

Collecting fashionable or rare sneakers isn’t a unique hobby just in the pandemic era, but collectors, known as “sneakerheads,”are dolling out a lot of money for the latest, most exclusive kicks. Online luxury retailer Farfetch has priced the Air Jordan 1 Retro High OG '85 in Varsity Red for $625 (at the current time of publishing this article). In the sneaker collecting world, however, that amount might be pocket change to some. The prototype shoe Kanye West wore to the 2008 Grammys, Nike x Yeezys, sold to a private collector for $1.8 million in early 2021.

Watches

Watch collecting isn’t new, but the monetary value in exclusive wristwatches has dramatically increased over the last two years. In early July of 2022, luxury watchmaker Richard Mille debuted the world’s thinnest mechanical watch, including a laser engraving of supercar maker Ferrari, for $1.88 million. Popular watch blog, “A Blog To Watch,'' estimates that collectors can have between 15 to 30 watches. Watch collections can range in value from $1,000 to well over a million dollars.

Vinyl Records

Vinyl records have been a popular medium for music collectors for more than 100 years and their value depends on many factors including the condition of the record, the name of the artist, and if it is a limited or withdrawn edition. Rare records can fetch monstrous sums. In 2018, Prince’s “The Black Album” brought in $27,500. Wu-Tang Clan’s album “Once Upon a Time in Shaolin,” for which there is only one copy in existence, was recently purchased for $4 million.

How Can I Protect My Valuables?

The best method to protect a watch is different from the best method to protect a pair of shoes. Bakonis has a few recommendations for protecting valuable collections:

• Start by considering what your collection is made up of. For example, a guitar made of specialized wood may need a temperature controlled setting to prevent warping. A vintage pinball machine will need to be kept in a dry place to prevent moisture from damaging its internal mechanics. Determine what special requirements your collection may need to retain its value. If you plan to modify your home in any way to preserve your collection you’ll need to notify your agent.
• Have your collection properly appraised. This will insure you purchase enough homeowners coverage to cover a potential loss. Discussing your collection with an agent will make certain your declarations page is as accurate as possible.
• Maintain an inventory. Note the condition, edition status, and any other pertinent information about the collection. Take digital photos and save any documentation such as invoices and appraisals.

The Bottom Line

Homeowners insurance typically covers personal property items for common causes of loss, such as fire, theft, vandalism, and other incidents. Your standard policy may include coverage limits, but these limits can be expanded with additional coverage. Insurance companies will generally pay based on one of a few different valuation methods: actual cash value, which is the cost to replace an item minus its depreciation, a value agreed upon at the time the insurance was purchased, or replacement cost, which is the total cost to replace the item at today’s prices. Payment will always be subject to policy limits and conditions. It’s important to check your policy to know which of these coverages you carry, what limits may apply to collectibles, and what causes of loss are covered or excluded. If your collection has exceptionally high values, it may be worth looking into additional coverage.