This is a subject we think is extremely useful and often overlooked particularly when discussing cover for your valuable and passion assets. Whether purchased for love, or investment, or indeed both, many of these assets appreciate in value significantly and in some cases even brand new items can command a higher price almost immediately after purchase – limited edition watches being a good example.
Most people insure things for either the purchase cost or for a figure based on a professional valuation as either figure acts as a baseline. It also enables the insurer to charge a premium based on that declared (or agreed) value.
So how do you ensure the insured value remains sufficient over time?
- Valuations are generally advised to be carried out at least every 3 years although there will be some assets, or larger collections where a more frequent re-appraisal is advised.
- Where insured values are not re-assessed or re-valued regularly this can lead to under-insurance and claims not being settled in full, leaving you out of pocket.
Even where regular valuations are undertaken, there can be significant changes in market value for some valuable items in a short period of time, particularly certain types of diamond jewellery/rare and collectible watches and works of art where popularity of an artist increases suddenly.
Some of the specialist insurers that we work with have protection for fluctuations in market value built into their policy wording to avoid you being out of pocket, often known as extended replacement cover.
How does it work?
In simple terms, extended replacement cover is an automatic buffer to protect against a shortfall in the agreed value of an item if the market value rises between valuations, and Insurers will promise to pay a percentage or capped amount over the sum insured.
The actual level of percentage increase or capped amount of cover varies between insurers and we can guide you through the specific wording under your own policy and identify whether this is suitable for your requirements.
As you might expect, there are conditions to this cover enhancement and the principle requirement by an insurer will be that a professional valuation must have been carried out within a set number of years prior to the loss; this again varies depending on the insurers but 2-3 years is the usual level.
Whilst extended replacement cover is undoubtedly very useful and does provide peace of mind, working with a professional and expert broker should be the first step in making sure that your assets are insured correctly from the outset.
At Lockton, this is what we do.
We specialise in creating bespoke insurance programmes for clients who need more than 'one size fits all'. For Lockton Private Clients, no clients' requirements are the same. Everything we do starts with building an understanding of what matters most to you so that your insurance cover follows suit.