Insuring Your Instruments - A Consumer's Guide
by Joan Hamilton
After a recent rehearsal of the Dallas Symphony, violinist Ron Hudson nonchalantly wandered out of the dressing and down the hall to speak with a fellow player. When he returned a few minutes later, his Guarneri was gone.
It disappeared that fast - and of this writing, still hasn't been recovered. But you don't need to own a Guarneri to know how valuable - both financially and emotionally - a beloved instrument can be. And that value demands insurance coverage. Virtually everyone - from major symphony players to amateur chamber musicians, teachers to students, owners of cherished heirlooms to active instrument collectors - needs it. The task is in determining exactly what you need and choosing from what's available. Take the time to make sure you understand the terms and potential land mines lurking in complex policies for specialty items like instruments. Otherwise, you may be covering only a fraction of your instrument's value against a fraction of the risks. Or even paying for coverage you will be unable to collect on.
Determining your instrument's value is really the starting point for your odyssey into the sometimes labyrinthine world of insurance. However precious your instrument is to you, it is only worth its most recently appraised value when the time comes to file a loss claim. If you brought the instrument from a dealer fairly recently, the bill of sale is sufficient. If you bought it privately or at a discount, you'll need an independent appraisal.
Then, with the appraised value in hand, you need to make a basic decision - is the instrument worth insuring? The loss of a prized instrument is always painful, yet the minimum premium charged by most companies may simply be too high to bother insuring a plywood cello. The table accompanying this article can give you some idea about premiums, deductibles and minimum charges.
“Most insurance companies don't want to write instrument policies because they don't understand the risks or how to rate them,” explains Edgar Feldman, co-owner of New York insurance brokerage Clarion Associates. Indeed, instruments, particularly stringed instruments, are complicated to insure for several reasons: They vary widely in value. They are delicate and vulnerable to damages - some virtually invisible - that can ruin their sound quality and much of their value to a player. And they require frequent, professional appraisal.
If insurers are so reluctant to cover instruments, can you really find what you need? And are there any good deals?
Yes, and yes. For reasonable and comprehensive insurance coverage, you can hardly beat the policies offered through several associations who have set up special group policies with experienced instrument insurance brokers. In fact, having a broker who is intimately familiar with instruments and musicians is the key to not just an attractive premium cost, but also good service. Most reputable dealers, like Philadelphia's William Moennig III, avoid recommending specific insurance companies, but do advise customers to seek experienced agents “who are familiar with instruments and bows. When you call about a specific item, it's nice when the agent doesn't have to ask you how to spell it, ” says Moennig.
New York's Clarion Associates, or Philadelphia's Merz-Huber Insurance Co. are most frequently mentioned by instrument dealers. Clarion insures both Chamber Music America and the Violin Society of America, while Merz-Huber covers the American String Teachers Association and the American Suzuki Association.
Both amateurs and professionals are eligible for the low rates offered through these groups. To join, you must pay a nominal associate member fee, usually $25 to $35. “It is often worth joining the organization for the insurance savings alone,” notes San Francisco instrument dealer Roland Feller.
Some players erroneously believe their instruments are “automatically” covered by homeowner's or renter's policy. (For our purposes, we'll refer to these as “homeowner's” policies.) While they do provide “general contents” coverage that can include instruments, they always stipulate internal limits. Say you live in a $100,000 home with a content limit of 50%. In the event of a significant robbery, a fire, or other widespread damage, you are only eligible to recover $50,000, regardless of what was lost or ruined. Are you ready to choose between replacing your clothes and furniture, or your Gagliano?
A more serious problem with homeowner's insurance is that it only applies to amateurs, and insurers all define “amateur” differently. Some say any remuneration at all makes you a professional, while others may put a cap on what you can earn as an “amateur.” If you violate the distinction, however, the company may legally refuse to pay your claim. “I don't write any amateur coverage any more because sooner or later everybody is a professional,” explains Ralph Hoffman of Merz-Huber. “If you play a wedding and damage or lose your instrument, you are not covered.” Even if you play the wedding for free, you may not be covered under a homeowner's policy that does not have provisos for “extended” theft and damage outside your home.
Nonetheless, a few companies will consider adding a “personal articles floater” to your homeowner's policy. Atlantic Insurance, Chubb, Fireman's Fund, and St. Paul are the ones most often mentioned by knowledgeable brokers. They are inclined to provide full service to keep the business of highly valued customers; if you qualify by insuring other valuable property with them, their rates for instruments can be quite attractive. Both Chubb and Fireman's Fund, for example, will add a floater - which simply means an itemized list of items with an agreed-upon, or “scheduled” value - to your homeowner's policy for between $.50 and $.65 per $100 of value, with no minimum premium and no deductible. The plans can be difficult to obtain; Fireman's Fund extends the courtesy only to holders of its highest level “Prestige” insurance plan.
Some players have their insurance paid in part or fully by their union or by their orchestra. If yours doesn't, the American Federation of Musicians does offer a group rate and quite broad coverage for $2.40 per $100 of value. That may seem high, but it is designed especially for professionals and may cover players who are not eligible for other options.
Even if your policy is completely taken care of for you, it's a good idea to understand its terms and conditions: They could influence the way you treat and transport your instrument.
For example, Feldman points out that many musicians with insured instruments hardly think twice about loaning their instruments to other players, especially to students. But consider this scenario: a young musician with an important recital approaching asks to borrow his teacher's precious Cremonese violin. While practicing at home, the student takes a short break. He runs to pick up his mail and leaves the door ajar. Far-fetched? Worse happens. A prowler slips in and exits with the fiddle.
Because the teacher is covered, he receives a check from the insurance company. But the story isn't over. “There's a clause called subrogation in most policies,” explains Feldman. “It means the insurance company has the right to go after the student and try to recover the money, because the student was negligent. This kind of loan seems safe, but it can mean the end of a student's career.”
Hidden clauses and exclusions may influence your choice of policies, so don't be afraid to ask questions when something's unclear. Virtually every policy you encounter will be termed “all risk,” which generally covers the major risks of insurance including fire, theft, and accidental damage. This kind of policy is more comprehensive than so-called “named peril” policies, which only cover risks exactly as listed. Although all-risk tends to be more expensive, most agents suggest it, if only for the peace of mind insurance is supposed to buy. Accidents have a stubborn way of happening almost, but not exactly, as described. For example, unless you explicitly have coverage under a named peril plan that covers the instrument when it's in the shop for cleaning or repair, some companies will not consider damage done there accidental, and they will not pay the claim.
But all-risk plans are not fail-safe either. Since there are always exclusions, all-risk is really the insurance industry's version of a car dealer's “full warranty.” First comes a list of standard exclusions which includes nuclear radiation, acts of war or government, gradual wear and tear, vermin infestation, and “inherent vice,” meaning that there was a flaw in the instrument's construction in the first place. “Wear and tear” is fairly clear-cut, of course - few players expect the insurance company to pay to have a bow repaired. But “acts of government and war” might include such incidents as damage by border guards searching your possessions if you are traveling in a troubled area. There is simply no substitute for checking with your insurance agent to see how a company will interpret problems you are likely to encounter, because companies' interpretations differ dramatically.
Here's a case in point of how the all-risk plans of two insurers differ: UK-based British Reserve Insurance Companies Ltd. will not reimburse you for damage done by someone trying to repair, restore, dye, or clean your instrument. Nor will they pay a claim on an item left in an unattended vehicle, or one damaged by extremes of temperature or sonic boom, stolen by someone to whom you loaned it in good faith, or lost or damaged through “confiscation or detention or nationalization by Customs or other Officials or Legal Authorities.” Chubb Insurance, on the contrary, makes no apologies for its stringent policy standards or prices, but it prides itself on a liberal claim policy with no unusual exclusions. Says underwriter Kathleen M. Stearns of Chubb: “We are careful about who we decide to cover, but once we do, we find no reason to put them through agony trying to recover a claim.”
Another potential trouble spot is the exact wording of the policy regarding your instrument's value. You want to make sure your instruments and bows are insured under a “valued at” or “agreed value” clause. A policy that says “amount of insurance” just isn't good enough. That leaves the insurance company with the right to replace your instrument with one the company deems equivalent, instead of paying you the full value in the event of total loss or extensive damage. A large company may negotiate for an instrument at a discounted price unavailable to you. Their payment to you reflects this buying power - and may be too small to let you literally replace your instrument.
Even though stringed instruments usually appreciate, insurers may figure in a depreciation rate when paying your claim unless you have a “valued at” clause. This clause is especially important when you are insuring an heirloom instrument that may have tremendous sentimental value, although limited cash value. In the case of extensive damage, for example, the company could refuse to pay for a full repair if the repair cost exceeded the depreciated value of the instrument.
Most agents recommend having a reputable dealer or expert reappraise each item every two or three years and keeping both the written appraisal and a photograph of the insured property in a safety deposit box. Moennig recommends an appraiser who is known to the agent and who belongs to an established professional association, such as the American Federation of Violin and Bow Makers.
The written appraisal should fully describe bows and instruments, taking note of materials including precious metals such as bow fittings, plus your case or cases. When acquiring a new item, beware the practice of some dealers who assign the appraisal value higher than the purchase price by innocently wording the appraisal “for insurance purposes only.” Supposedly a courtesy to you, the buyer, its real purpose is to soften the blow of spending money by making you feel you've gotten a good deal. Quite the opposite, if ever you file a loss claim and your bill of sale surfaces, dated the same day as the appraisal but at a lower value. Fraud charges are no picnic.
Another potentially troublesome risk is traveling with or shipping your instrument. Even though you're generally covered for damages in shipping and handling, multiple claims could mean a claim increase or even a policy cancellation. Much to the confusion of airline attendants many cellists regularly buy the adjacent airline seat for a friend, “Mr. Cello,” to avoid subjecting him to the rigors of the baggage compartment and the fact that airlines refuse to accept responsibility for highly valued items. Be careful shipping your instrument to a dealer for repairs of cleaning; Moennig cautions his customers to avoid United Parcel Service, because that company considers most stringed instruments “fine art” and will not insure them against damage, whereas several others shippers including Air Parcel Service offer some limited protection.
When selling or trading an instrument, notify your insurance company immediately. After selling an instrument, the company will reduce your unpaid premium, or refund an excess paid premium. On a recent purchase, they will typically provide coverage up to a certain value - usually $10,000 - but only if you report it within 30 days.
Surprisingly the most common source of insurance claims for instruments continues to involve automobiles. Leaving instruments attended in an automobile invites two kinds of trouble: theft and damage by extremes in temperature.
In essence, insurance is a betting game: You are betting a relatively small premium that there is a good chance your instrument will be damaged or stolen. Your insurance company is betting a large premium that you probably won't need to file a claim. Our advice is: Find the best odds, and then do all you can to let your bet ride!
A few words about insurance for makers and dealers . . .
Instrument insurance for makers and dealers is a completely different kind of coverage than the typical player's policy. Variables such as business size, location, alarm systems, value of the instruments handled, and even the skill and experience of the craftsmen, all affect how commercial policies are written and priced. Though it's difficult to provide “standards” against which you can measure a prospective policy, experts do advise makers and dealers to be aware of some basic facts -- and some potentially disastrous misconceptions:
If you intend to sell, make, or repair instruments, you are not covered against your losses to those instruments through your personal player's policy. The “professional” distinction among players is irrelevant in commercial coverage.
You need an alarm system before an insurance company will consider writing a dealer policy. And if you sell or work on highly valued instruments in your home, the insurer may demand an alarm that surrounds one isolated part of your house to function as a vault.
When you perform repair or cleaning work, note the value of the item on the receipt. Not doing so invites insurance trouble.
In dealer policies, you'll find a clause about “co-insurance.” It requires you to carry insurance for at least 80% of the dealer value of both your property and that of others on the premises. The insurance company computes the coverage after a claim is made, using the following formula: Amount of coverage carried divided by the amount of coverage you should have had, multiplied by the loss.
Say you're covered for $100,000 but you took in a couple of extraordinary old fiddles on consignment and suddenly your inventory is worth $400,000. You make a $10,000 claim that has absolutely nothing to do with those two fiddles. But the insurance company is only obligated to pay you 25%, or $2500. Simply because you failed to increase your coverage temporarily. “Dealers should take a monthly inventory,” says broker Edgar Feldman of Clarion Associates, “and when you take in a particularly valuable instrument, it's important to call your agent and increase the policy.”
Although dealer policies often cover shipping losses, you should declare the maximum value allowable of property shipped. Even if full value cannot be declared, not declaring any value means the insurer cannot try to recover any of the loss from the carrier, even if the carrier was negligent. The dealer would be covered, but claims like this could effect whether your insurance company renews your policy. It is especially important to declare value when shipping someone else's property, since not doing so could be construed as negligent in itself.
