Should You Insure Your Hobby?
By Diane Tait
Image courtesy Pixabay
Many people enjoy hobbies. That being said, if your hobby is high risk, or it results in an accumulation of high-priced stamps, coins, art objects, antiques, or collectibles, you may want to talk to your insurance agent to make sure you’re covered. To help you get a grip on what you need to do to determine how best to cover your hobby, I’ve come up with a few pointers you may wish to peruse.
Is my collection worth insuring? While most folks have a sentimental attachment to the items in their collection, many aren’t really sure of its value. I mean, if all you collect are bottle caps or hand-carved duck decoys, your collection might not be worth all that much in dollars and cents. On the other hand, one or two items in the collection could be worth a king’s ransom. The only way to determine the monetary value of any collection is to enlist the aid of a professional appraiser. He or she will be able to help you put a dollar value on your entire collection, as well as individual pieces. Insurance aside, it’s always a good idea to find out if you’re sitting on a gold mine or are just collecting items that are more valuable to you than they would be to another buyer. Face it, the value of items fluctuates from year to year. What might be considered priceless one year could be nearly worthless the next. (Remember the Beanie Baby craze?) Besides, if you ever have to file an insurance claim on an item in your collection, you’ll need to know what it’s worth. Most homeowner’s policies base the payout on the actual cash value of an item. An appraisal can be vital to getting your money’s worth if you file a claim.
Is my collection covered under my existing homeowner’s policy? That depends. While some policies include coverage for artwork and collectibles, others exclude them altogether. Even if your homeowner’s policy includes such coverage, it no doubt limits how much it covers. Many policies limit the amount of non-household item coverage to $500-$2000. If your collection is worth more than the stated limit on your policy, you should look into obtaining a rider or purchasing coverage separately. Unlike a separate policy, a rider or endorsement adds coverage to your existing policy. If your insurer agrees to issue one, it could save you money, since it involves less underwriting than issuing a separate policy.
How do I know which insurance company offers the best coverage for my collection? – The fact is that different companies specialize in different collectibles. While some insurers offer better terms for antiques, others are better at insuring sports memorabilia. There are even specialty insurance companies that only deal with certain types of collectibles. In a recent study conducted by Investopedia on collectibles insurers, everything from third party ratings to customer support, and streamlined application processes were taken into consideration. If you’re working with an independent insurance agent, he or she knows much more about which insurers deal with collectibles. Some agencies even have agents who have a great deal of knowledge on insurance companies that offer the best collectibles coverage at the best rates. All you have to do to find out what they recommend is to pick up the phone.
Does your hobby pose a risk to your domicile? While most hobbies don’t pose an inordinate risk to your home, if you enjoy blowing glass or welding metal in your attached garage you should talk to your insurance agent to find out if your hobby represents a covered claim. Even if your hobby simply involves buying and selling baseball cards, you may come to find that any business venture leaves you lacking coverage should a customer injure him or herself while in your home. The bottom line is if you run a business of any kind from your home, it would be a good idea to touch base with your agent to find out how this can affect your coverage.
Do you have a need for speed? If your hobby puts you at peril, you may come to find that it can jeopardize your life insurance coverage. Since insurance is based on risk, insurance companies don’t like to offer coverage for high-risk ventures unless you’re willing to pay for the privilege. If you’re into base jumping, extreme sports, flying, hang-gliding, car or motorcycle racing, mountain climbing, skydiving, or any other activity that could be considered hazardous to your health, you can expect to pay substantially more for coverage than those who don’t put their life in peril to support their hobby. However, if you fail to mention to your insurance agent that you participate in potentially dangerous activities, you may find your policy could become null and void when you need it most. That’s right, life insurance policies have a 2-year contestability period. If you falsify information on the application, the insurer has the right to reduce, cancel or deny coverage.
How much will a hazardous hobby increase your premiums? That depends on the sport and how often you participate in it. If you like to jump out of airplanes, you could be looking at an annual increase of hundreds to thousands of dollars depending on how often you jump. The only other alternative to a skydiver is to purchase a policy that excludes skydiving as the cause of death to keep life insurance costs down. When you consider that only 3 in 100,000 jumps result in a fatality, the odds of beating the odds as a skydiver are pretty good. But the decision is yours. Other extreme sports are priced on the risks involved, as well as the health, age, and experience of the applicant. If you participate in an extreme sport often and wish to obtain life insurance, you may be required to seek the services of an insurance agency that specializes in providing coverage for just such a sport. For instance, third-party sky diver insurance is written to cover death or disability resulting from a jump. If you plan on sky diving while traveling, there are some travel insurance providers who are willing to provide coverage for just such an activity. However, that’s not to say that all travel insurance covers such a risky endeavor. If you’re even thinking about going on a tandem jump, it would behoove you to talk to your insurance agent to find out if skydiving is excluded in your current policy or if you need to add a rider to cover you for the event.
Will an accidental death benefit rider cover you if you participate in an extreme sport? Maybe yes and maybe no. It all depends on how the policy is written. For instance, accidental death riders may contain exclusions for extreme sports even if they don’t mention the sport by name. You need to read the exclusions section carefully to see what is excluded. If you like to race dirt bikes and you don’t see anything remotely related to such an activity on your policy, better to call your agent to see if you’re covered or if you can add an endorsement that will eliminate an exclusion for just such an activity. Ignorance may be bliss, but not in the case of insurance coverage. What you don’t know can come to harm you or your family’s financial future.
Diane Tait owns and operates A&B Insurance. To find out more about how you can save money on insurance, go to her site or fill out the form at right.