Some assume that a homeowners policy provides coverage if collectible items are stolen, lost, or damaged, but that’s not always the case. An unendorsed homeowners policy typically caps coverage at $1,500 - $2,500 for items like jewelry, art, or memorabilia.³ Someone with a jewelry collection will likely have multiple pieces far more valuable than $1,500. The same is true of art, wine, and other collectibles. In many cases, a standard carrier can increase limits to a maximum of $50,000 - $100,000. If the value of an insured’s items exceeds these limits, it’s important to partner with a carrier specializing in higher-limit personal article floater (PAF) policies.

WHAT IS PERSONAL ARTICLE FLOATER COVERAGE?

PAF insurance is a standalone policy that provides coverage for valuable personal items. It’s a flexible form of coverage commonly used to insure jewelry, fine art, musical instruments, camera equipment, and other personal possessions. It’s an individualized coverage option that can be applied to one valuable item or an entire collection.⁶ Limits, terms, and conditions vary based on the specific items insured. Still, a PAF policy can cover nearly anything of value against a wide range of risks, including loss, accidental damage, or theft. The policy's value is usually based on a credible third-party appraisal. However, depending on the carrier’s requirements, a “Bill of Sale” may be an appraisal alternative for many items valued at or below $10,000 - $25,000. Premium varies based on the value of the items insured and the underlying risk, but PAF coverage is generally affordable. Prices have remained stable in recent years, even as other lines of coverage experienced price increases.

WHY ARE PERSONAL ARTICLE FLOATER POLICIES INCREASING IN POPULARITY?

After several years as a rarely used form of coverage, there has been a recent uptick in demand for PAF coverage. This is likely due to emerging challenges in the homeowners insurance market. Homeowners in more catastrophe-prone areas or those at higher risk for flooding or wildfire may have difficulty obtaining homeowners coverage. From 2018 to 2019, the rate of insurer-initiated non-renewals in California zip codes with exceedingly high fire risk increased from just over 3% to 7.3%. For zip codes with moderate to high risk, the rate of nonrenewal increased to 4% and 3%, respectively.¹ California isn't the only state where insurers are initiating non-renewals because of increased fire risk. Homeowners in Colorado have also reported a rise in non-renewals due to wildfire exposure.²

When a homeowner’s policy is not renewed, limited options exist to replace coverage. Many attempt to obtain insurance from another carrier at a higher price or with reduced limits. Others may seek coverage through their state's Fair Access to Insurance Requirements (FAIR) program. FAIR plans are designed for homes that don’t qualify for standard homeowners insurance due to their condition, location, or claims history. FAIR coverage is often available in coastal states and others that experience wildfire. Today, more than 30 states maintain some version of a FAIR Plan.⁵ In either case, the homeowner will likely end up with less than adequate coverage for valuable items or collectibles.

WHAT YOU SHOULD KNOW ABOUT OBTAINING PERSONAL ARTICLES COVERAGE

PAF policies are a straightforward and affordable form of coverage. However, knowing what underwriting expects before developing a submission is helpful. Underwriters want to see information about the security in place to keep valuables safe or how often an item is used. Carriers also frequently ask questions about how collectible items are stored. Details about climate-controlled environments, security cameras, or other measures designed to prevent theft are helpful in appropriately assessing the level of risk. Generally, the more valuable the item, the higher the insurer's expectations regarding security.

Underwriting may also request information about the homeowner’s claim history. Someone with a history of losses will likely experience more difficulty obtaining full coverage. In addition, a less experienced collector may face higher prices than a collector with a strong track record of appropriately securing valuable items. Every scenario is different, but policyholders should expect to answer various questions about item value, storage, and security, with the level of scrutiny increasing in alignment with the collection’s value.

BOTTOM LINE

PAF coverage presents a unique opportunity for agents to connect with high-net-worth individuals and provide an affordable but essential form of protection for their most valuable items. Brokers and agents serving these clients should make it a point to ask the right questions to help uncover the homeowner’s insurance needs. When putting together an insurance package, agents and brokers can help by asking about any unique collections, valuable artwork, or jewelry the homeowner may want to protect, as many clients don’t realize the limitations of a traditional homeowners policy. For long-time collectors, it’s also essential to make sure items are regularly appraised so that appropriate limits can be purchased as values rise.⁶

Many carriers offer PAF policies. Finding the right policy for your client means working with an experienced and knowledgeable broker. CRC Group brokers have the market access and product knowledge to obtain the right coverage for your clients with valuable items or collections. Reach out to your local CRC Group producer today for more information.

CONTRIBUTORS

• Allison Talus is the CRC Group Personal Lines Regional Director – Western States and a member of the Personal Lines Practice Advisory Group.
• Claire Willis is Director of CRC's Gulf Region Personal Lines team and CRC Group’s Personal Lines Practice Group Leader.

END NOTES

1. Insurance Availability and Affordability Under Increasing Wildfire Risk in California, Resources for the Future, November 30, 2022. https://www.rff.org/publications/issue-briefs/insurance-availability-and-affordability-under-increasing-wildfire-risk-in-california/
2. Insurance denied: More Coloradans can’t get homeowners insurance because of wildfire risk, Denver7, January 16, 2023. https://www.denver7.com/news/contact-denver7/insurance-denied-more-coloradans-cant-get-homeowners-insurance-because-of-wildfire-risk
3. Does homeowner insurance cover jewelry?, Bankrate.com, January 6, 2023. https://www.bankrate.com/insurance/homeowners-insurance/does-home-insurance-cover-jewelry/
4. Collecting: An Urge That’s Hard to Resist, Psychology Today, October 29, 2020. https://www.psychologytoday.com/us/blog/the-mind-collector/202010/collecting-urge-s-hard-resist#:~:text=Around%2033%20to%2040%20percent,often%2Dpassionate%20individuals%20to%20collect
5. FAIR Plan insurance guide: What it is & how it works, PolicyGenius, December 30, 2022. https://www.policygenius.com/homeowners-insurance/what-is-a-fair-plan-and-how-do-i-get-one/
6. Protecting prized possessions with valuable articles insurance, Insurance Business America, October 8, 2019. https://www.insurancebusinessmag.com/us/news/high-net-worth/protecting-prized-possessions-with-valuable-articles-insurance-180033.aspx
7. Collectibles Market is expected to display a steady growth of around 4% due to the growing online sale of antiques and collectibles globally, Cision PR Newswire, September 28, 2022. https://www.prnewswire.com/in/news-releases/collectibles-market-is-expected-to-display-a-steady-growth-of-around-4-due-to-the-growing-online-sale-of-antiques-and-collectibles-globally--univdatos-market-insights-301634688.html
8. An eBay exec shares the collectible categories to watch for resellers cashing in on the $412 billion industry, Business Insider, April 8, 2022. https://www.businessinsider.com/collectibles-sold-on-ebay-can-produce-large-cash-grab-opportunities-2022-4