What is specie insurance?
‘Specie’ insurance is a type of insurance product for high-value portable objects. Stemming from the Latin speciēs, meaning “appearance,” specie insurance can cover currency, precious stones, collectibles and fine art. Specie insurance can be traced to mining operations, covering gold in situ, and is progressing to cover cryptocurrency storage today. While the object types vary wildly, the purpose remains the same - address the unique needs of these highly sought after items.
Specie insurance, or Valuable Articles insurance policies are tailored to rare materials or commodities and addresses the high risk of theft and the complexities of restoration far beyond traditional coverage in a homeowner policy. For high value or one-of-a-kind pieces, homeowners policies have exclusions baked in that often reduce or eliminate coverage. This could be a per-item limit or actual cash value which assumes depreciation, not appreciation, after purchase. As an example, standard homeowners policies limit numismatic property to $250.
If you have purchased or inherited a beloved piece, or have begun passion investing, it is critical to consider your current insurance coverage and whether it will cover what you need if an incident occurs. Coverage should include anything from outright theft to a nick in the frame to water damage that forever reduces the value of the artwork even after repair.
Insurance for complex commodities can feel daunting, so we focused on the key elements that make a specie policy unique when comparing to a homeowners policy, and how to evaluate the insurance company for fit.
Portable
A key element of specie insurance is that these items are expected to move. Homeowners insurance is focused on items within the home and can limit or exclude coverage in transit. Collectibles are loaned for exhibition, art moves to storage facilities, jewelry is worn to events. Specie insurance defines these items as ‘portable’.
Making sure your coverage includes transportation is critical for any items that might not be fixed to one location, as well as the handling required to prepare. Crate shops, installation companies, restorers or museum staff could all be involved. While you may always contract experienced professionals, any additional handling can increase risk. Any plans should be run by your insurance provider to see if third parties need to hold any specific limits of insurance.
Each location where your treasures may be stored or displayed should also be disclosed. Assessing the risk of the facility or residence will ensure your policy covers challenges that could arise. Insurance companies may be able to help you avoid a negative experience by asking knowledgable questions about the safety and security of the buildings and companies you are considering.
For these rare and often high-value pieces, the first thing that comes to mind is theft. There is clear value to everyone who interacts with the works, whether it’s sparkling diamonds or pottery on a plinth. While rare, there are on average 3 million home burglaries reported in the US each year. Keeping up to date records of your collection, including appraisals, provenance, condition reports, would establish a clear value in case theft occurs.
More commonly, there is a risk of damage to your precious purchases. Whether a designer handbag that gets scratched or an artwork falls from the wall, accidents occur. Homeowners policies typically do not cover conditions that do not render the item a ‘total loss’, whereas specialized specie insurance will help facilitate the repair of these items including the transportation to limit the exposure to further damage.
Protect jewelry from theft
More than $1 billion worth of jewelry “disappears” in the US each year. According to the U.S. Department of Justice, jewelry accounts for as much as 70% of stolen property.
High-Value
The second defining characteristic of these goods is their value, and with complex commodities come complex valuations. Unlike most objects on your homeowners policy that have an easily assessed cash value, unique and high-value purchases are often not replaceable and their value can be dependent on many factors.
First, you will want to make sure your policy covers damage in addition to replacement cost, especially if the piece cannot be replaced. Often with homeowners insurance you see the phrase ‘total loss’. Valuable Articles policies on the other hand offer ‘full risk’ solutions that can cover frame scratches, glass replacement, or a professional restorer.
Restoration can be the ideal solution when an incident occurs with precious objects. Maintaining the item and returning it to the state of which you purchased it allows you to keep possession of that special object.
For investments you intend to resell, restoration can have an adverse impact on the value of the work. A repaired artwork, for example, might lose value when the work is completed because it is not all the original handiwork of the artist. Specie insurance can cover the difference in resale value, as long as there are professional appraisals of the value before and after the incident occurred to determine the loss.
Some collectibles derive value from being part of a set. If you purchase a pair of earrings and one goes missing, it is unlikely that the remaining earring retains 50% of the original value. A single earring is much less appealing to a future buyer. This is why it is important to read into the ‘pairs and sets’ clause of your insurance policy.
Most homeowners policies work on an ‘actual cash value’ basis. Given that collectibles can appreciate in value, make sure you find a policy that allows for re-evaluations and covers the entire worth of the object - ideally up to 150% of the itemized value. By working with an insurance company who offers specie insurance and is familiar with these types of assets, you will have access to the specialized services such as appraisals, documentation, storage, and restoration required to maintain coverage and your collection’s high value.
Ephemeral Materials
If you are an art collector, particularly of contemporary artists, it is important to consider the materials of the pieces you purchase. Some things may not be covered, even with full risk insurance. Take the artist Urs Fischer who creates grandiose wax sculptures that are lit with a small flame and intended to melt over their display. Inherent to the artistic expression, insurance is not intended to cover the replacement of the wax sculpture. The melted remains are the artwork. A more infamous example might be Maurizio Cattelan’s Comedian, which is simply a banana taped to the wall - with a value of $120,000. In this artwork, the rotting of the banana is not the artwork but there are instructions that the banana will be continually replaced. Maintenance is part of ownership and display. It would be interesting to debate the claim of damage done to a fresh banana falling from the tape though!
Insurance
All of these auxiliary services needed to insure your collection often require a trained professional. Restoration is often very niche—someone who specializes in repairing fossils will likely not take on a modern painting. By working with an insurance company with a wide network of partners, it is more likely that you will be able to find the service required when you need it most.
Insurance companies can also connect you to services and technology to help with the administrative work of managing a protected collection. Having up to date appraisals ensures that there is an accurate value on file for each item you own. Documentation of the appraisals, as well as the recent sales, provenance, and condition reports can paint a more complete picture of the object’s value if anything would occur.
Having a good team in your corner can also help during the triage and resolution stage of the claims process. Being able to connect directly with a person instead of filing a claim online through a portal can provide peace of mind in a stressful situation. For lost or stolen items, the insurance company can begin an investigation for you and lead you through filing all of the paperwork. Documentation for insurance claims can range from photographs to police reports, and varies case by case.
With the right company though, these complex cases can still be handled efficiently and resolved effectively. A business with a digital presence, a focus on customer service, and auxiliary services will be the most likely to meet all your needs, pleasantly, and quickly.
Equipped with all this knowledge, you are ready to have informed conversations with insurers that offer the coverage you need. For the precious and precarious, you need a different specie of insurance.
Still shopping?
Most Valuable Articles policies also include a grace period for new purchases. This means that newly acquired objects can be covered from the point of purchase under your existing policy before you are able to document and add it officially. Some grace periods are as long as 90 days - time can fly by!
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References
Protecting Passion Investments: Trends, insurance implications and risk management best practices, Marsh Private Client Services, 2016
Fine Arts in Focus: Insurance Professionals Provide a Unique Glimpse into Protecting Treasured Collections, Courtney DuChene, Risk & Insurance, 2023
Life is one long decay, no?, Jaklyn Babington, Medium, 2020
