Hermès Birkin bags can run anywhere from $12,000 to $200,000. That’s a lot of cash for a purse. Or take designer gowns which can cost upwards of $10,000. Most people wouldn’t stop to think about what would happen if one of their high priced items suffered irreversible damage.
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Owners of high cost items might think that their homeowner’s policies cover designer apparel and couture items, but most policies don’t. According to Ron Fiamma, Vice President and Global Head of Private Collections for AIG (AIG), most homeowners policies have blanket coverage with certain caps. “Floods aren’t covered in homeowners policies unless specified--same thing with earthquakes,” he said. Normally, items would be covered under the content section of a homeowners policy, but extremely expensive items usually are not.
And when a pipe bursts in a closet or moths descend, you don’t want to be left with a wardrobe full of damaged items and no reimbursement.
AIG has a solution to the problem and plans to roll out a wearable collections coverage in all 50 states by the end of the year (states need individual approval). Currently, New York and Texas have approved the coverage. The plan will cover couture items, vintage and historical clothing, shoes, and handbags. Dry cleaning and wardrobe preparation are also included in the policy. And for customers who are being extra cautious, items that are currently being made will also be protected.
AIG worked with Garde Robe, a luxury wardrobe storage and preservation service that advised them on the biggest issues couture owners face. Coverage applies to items that are at home, in transit, on vacation or in a storage and wardrobe preservation center.
This policy also includes diminished value coverage. For example, if a client’s vintage Valentino gown valued at $50,000 suffers damage, the policy will pay to have it fixed in addition to reimbursing the loss of value.
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According to Fiamma, this policy was born out of high net worth clients increasingly asking for protection of their luxury items. He noted that in one case an inspector visited a client’s house and saw that she owned about 150 Birkin bags. “We try to be very creative and listen to our clients and the needs that they have. This particular product grew out of one of those needs,” said Fiamma.
For pricing, Fiamma said that there’s no minimum amount set and that even ‘modest’ collections can benefit from the coverage. Mitigating factors like California wildfires or hurricanes in the Eastern seaboard can reduce or raise a premium. According to Fiamma, if a client has a collection worth $1 million, the total starting premium would be $3,000.
More wealth advisers are looking at collectibles as a viable alternative asset class, says Fiamma, adding an incentive to insure significantly pricey items. “It’s an asset class that needs proper protection.”