The Fraud of Insurance

***Update***

It is not my intention to slander insurance agents or companies in any way. My intent here is to inform people of some of the pitfalls of insurance and things that can bite you.

My generalized statements about insurance companies, their agents and their adjusters are based on a recent experience I had with a claim filed with my insurance company; one of the top rated in the united states for customer satisfaction.

So I mentioned in the last blog post that the only way to get retail value out of your vinyl is through an insurance claim. I wasn't talking about insurance fraud or anything, but rather, regarding the true value of vinyl in a collector's market. But, in that post, I also said there were caveats to insurance that would be discussed later.

Well this is later and here this that discussion.

Again, I'm not talking about committing insurance fraud, but rather, protecting yourself from your own insurance company and your personal ignorance. This post is about the caveats of home owner's and renter's insurance policies and some of the things you can do to protect yourself in the case that you have to file a claim.

This is not an exhaustive list of of insurance dos and don'ts, but rather some of the things I discovered as the result of recent dealings with a claim against my own insurance policy.

Before I get started I just want to make sure we are all on the same page.

• Insurance companies are just that, companies. They are for profit companies that typically answer to shareholders. An insurance company's job is make money, not pay it.
• It has been my experience that an insurance agent is not your friend. They are an agent of the insurance company, and they are meant to help the company meet it's first objective; make money. Again, based on my recent experience with an actual claim.
• Insurance is a socialized service, as in socialism. This is where the company, much like Affordable Healthcare Act, is betting that majority of the customers will not make a claim, all the while, paying premiums to the company. And for the most part, insurance companies are right. It's a lot like gambling, the insurance company is the house and we are the gamblers placing bets. And we all know the odds are stacked in the house's favor.

So with all that said, let's get going.
 
What is your record collection worth? What is it worth really? If you had to replace it, what would it cost you? This is not a question I am asking you to answer in the comments below, but a question you should be able to prove to your insurance company.

Fire... flood... earthquake... leaky roof... theft. These are just some of the possible demises of your record collection. And here is something to think about; if there is a fire, there is a good chance that there will be water damage as you are required by your insurance company to make every possible effort to prevent the spread of damage and in the case of a fire, this means calling the fire department who use water to put out a fire.

These are things that lovers of vinyl do not want to think about and shouldn't have to. But the reality is; if you have not verified that your insurance policy specifically covers your records individually or as a collection, you may have to address the 300 lb gorilla in the room; you may have to rebuild your collection on your own.

Here are some things to consider when reviewing your home owner/renter's insurance policy.

• What type of collection do you have?
• What is the estimated replacement cost? Did you include shipping?
• What situations does your insurance cover?
• What are the loopholes in your policy?
• How much is your deductible? 
• What proof is required to prove the loss?
• Alternative Insurance Providers

There are 101,000 different things that can go wrong and end up destroying part of, or all of your collection. Since we cannot predict the future or the unknown, it's important to at least cover what we do know. So let's start with the important question first.

What type of collection do you have?

Is your collection large or comprised of limited editions, promos and rare prints (read expensive). If so, you may want to talk about a specific policy to cover the collection. Some policies will not cover "collections" as a part of a general policy. In insurance company lingo, "collections" include art, guns, gold and jewelry, comic books and yes, can even include vinyl. Even if your collection is just normal pressings, the value of the collection may exceed the policy limited on "collection" value.

You will need to talk with your insurance agent about whether your vinyl falls under this special clause and if you need to modify your insurance coverage to ensure your collection is covered for it's replacement value. 

What should your insurance cover.

You need to ask specifically, and get in writing, what incidents your insurance will cover; fire, water damage, floods, earthquakes, landslides, etc. Basically whatever the possible scenario would be for where you live. Tsunami damage isn't likely in Iowa or Tennessee, but flooding and tornado damage is so make sure you are covered for where you live.

Your insurance policy should be able to replace your entire collection, minus your deductible regardless of the "expected" incident. So you need to talk to your insurance agent about reviewing your policy to ensure that this the case. 

It is that simple. 

While we are talking about what your insurance will cover, you need to make sure your deductible is reasonable based on your collection value. If you have $3000 deductible and your collection is only valued at $1000, it's likely that the replacement of your entire collection would fall entirely on you.

What are the loopholes in your policy?

When you purchase insurance, the insurance company will assume a value for rebuilding the home (in the case of a homeowners policy), based on the appraised value of the property and structure, as well as replacing the items in the home. This is called the 'Sum Value'.

And here is the first loophole; You, and only you, are responsible for ensuring this value is correct. While the cost of replacing the structure is based on the appraised value of the property, as property values go up, you need a appraisal to update the value for your insurance. For most insurance policies your house rebuild costs should be covered without challenge within the coverage amount listed in the policy.

But coverage for contents within the home (furniture, electronics, kitchen-ware and appliances, etc.), listed as a line item for the sum value, are usually found to be way below where they actually should be to protect the home owner.

You really need to calculate the value of your home's contents and do it room by room or by category, your choice.

• Furniture (beds, chairs/couches, dining set, desks, etc); $10k - $15k
• Electronics (desktops/laptops, tablets, xbox/playstation, cellphones, televisions, etc); $5 - $10k
• Toiletries (toothbrushes, linens, shower curtain, bath rugs, etc.) $1k - $5k
• Etc.

or

• Dining Room; $2k - 5k
• Kitchen; $10k - $15k (think appliances)
• Living Room; $8k - $12k 
• Master Bedroom; $5k - $8k
• Etc.

Artwork, guns and jewelry and other items considered expensive are generally treated differently and should be brought up as separate items with your insurance agent. This can include a vinyl collection.

Then there are the sneaky loopholes; things in your policy, that your agent will not always fully disclose, that can actually prevent your insurance company from being obligated to pay you the total value of your claim.

For instance, there is a common loophole of "Max Value for a single item". A collection, considered by many insurance companies as a single item, can cause you issues. Even a collection of 1000 records, is a single collection and a is commonly treated as a single item. If the Single Item Max Value in your policy is at $1000, you will only receive $1000 for that item or collection, even if it's worth seventeen times that.

A lot of people are bitten by this one.

This is why it is important to specifically bring up your collection and whether it is covered regardless if they are comics, baseball cards, motorcycles or vinyl records. One way you might be able to avoid this "single item" loophole is to create your own loophole by listing each and every item in your "collection" as separate items.

This means stating you have 1000 plus individual vinyl records providing a list containing all of the items. This means that you will have update that list frequently, like once or twice a year or even more frequently, depending on how fast you acquire, sell or trade records, but this is one possible way around the Max Value loophole.

Another sneaky insurance company loophole is Actual Cash Value (ACV). Actual Cash Value is a purposefully confusing phrase as it may lead a customer, unfamiliar with insurance lexicon, so assume this phrase means the cash value of an item. This is not the case. Actual Cash Value is where the insurance company applies the original cost of purchase of an item and then calculates a depreciation value based on it's age versus it's expect lifetime. For vinyl, this means an original Led Zeppelin's first album, released in 1969 for $3 would have an estimated actual cash value of about $0.18 based on the following;

• Purchase price of item when new = $3; 
• Current Age of item = 47 years; 
• Expected Life of Item = 50 years.

I used this online ACV calculator for the above estimate.

$0.18 is not even close to the true value of a copy in very good condition (sleeve and media) which sits at about $880 as of this writing.

This is is why it is critical to ensure that your policy covers the cost of replacement and not ACV. Replacement costs should also include shipping and handling, replacement of plastic sleeves, etc.. Cash value is; the depreciated cost of the record. To get $180 for a record collection that contains 1000 records worth upwards of about $15k to $20k would been completely and utterly devastating to anyone who loves their collection.

Your estimated value, the value you provide to your agent, should be based on what it would cost you to replace your collection, not what you paid for it. So that $60 KISS double platinum album you picked up at a garage sale for $2 would likely cost you $60 to replace if it were damaged because your chance of finding it again for $2 is not likely.

Again none of this is a guarantee, as all policies are different. It just something to talk with your agent about to ensure you are not going to be horribly disappointed because you didn't know.

What proof do you have to provide?

Well, this all depends on the company and policy. Some companies will claim to only require an itemized list. But some will outright require photos of each piece in your collection so their insurance adjuster can evaluate the grade of each piece.

Grading, as you know, is important to the value of a record, not only the grade of the vinyl itself (known as play-ability) but the grade of the cover and inner sleeve especially when you are talking rare, original or limited pressings of records.

Now grading is very subjective as there is no definitive guide for grading vinyl, but rather a collection of ideas, thoughts and methodologies and so it comes down to everyone having their own opinion. So your insurance adjuster may grade your albums much lower than you would, because it is the adjuster's job to save his company money. And there isn't much you can do about that.

Because of this little thing called insurance fraud, insurance companies are not very likely to just take your word for it, even if your agent claims they will. See people are known for claiming things like they had a mint condition Beatles White Album with a serial number "numbered 200 some thousand range" when in reality they had a 80s reprint with no serial number. So insurance companies will generally require some proof and the more valuable the collection or items in a collection, the more proof they will require.

In the case of water and smoke damage, the physical copy of the records still exists and can be verified by a claims adjuster, but if your collection is literally, physically destroyed by a home fire, you have lost any and all proof of their existence.    

You're best bet is to photograph or video tape every album, front cover, back cover, inner sleeve, inner bi-fold if applicable and both sides of each of the vinyl in the album, and even posters and other memorabilia that may have come with the album. This is the only way to show proof. Just a piece of advice, you will need to store these photos some place other than your home, as the same fire that destroyed your records could also destroy your proof. 

So, as an example of a recent album, Metallica's Hardwired Box Set, should include photos of the six buttons, four lithographs, all three vinyl (both sides of each of the three vinyl disks), front and back of each of the sleeves, the box, etc. This is because each component and the condition of each component of an album adds to the value of the album. You may have a near mint graded sleeve, but a very-good graded media and this would affect the grade of the vinyl and thereby affect the value.

Here are some pointers to documenting your collection.

• Each photo must be in focus.
• Each photo must be a full-size, quality image, e.g no cell phones (artifacts in the cellphone photo can degrade the visual estimate) or thumbnails. This is so the adjuster can look at the details of each part to determine scratches and damage before the incident. 
• Each photo should include the entire subject, specifically capturing printing numbers on sleeves and vinyl. And no cutting off a corner of the sleeve as it may appear that you are trying to hide something. 
• Each photo of each object must fill the frame. If you photograph the vinyl and sleeve from across the room, or as part of 20 LP montage to save time, the adjuster may claim that there is not enough detail to determine grade and just provide the lowest price for replacement, which in turn limits your ability to replace your lost collection. 

It is a daunting task that is both tedious and time consuming, especially for larger collections, but shortcuts in this process could cost you dearly. In the end, the more proof you have of your collection, the better your chance of getting your collection replaced.

Alternative Insurance Providers

Yes, there are companies that specialize in insuring anything and everything from J.Lo's butt to Lady Gaga's voice and yes, even your records. But be prepared to be hit with sticker-shock as the premiums prices of these policies (the price each month) tend to be as appalling as the process for submitting a claim with the company.

So that's it folks. This is my insights for properly insuring your record collection. Again this is not meant to be definitive list, just some pitfalls I have experienced. If there's anything I missed, make sure to leave it in a comment below.

Until next time... drop the needle and groove on baby... groove on.