Money: The art of insurance

Terrified of displaying your treasures? You don't need to be.

Phil and Ruth had a dilemma. For years they had been collecting antiques, and they knew that they were grossly under-insured. Their home contents were covered by a standard household policy. Years ago the insurers had required an alarm to be installed and quality locks to be fitted to all exterior doors and windows. The couple had no problems with this, which they regarded as sensible security measures. But they did not like the restrictions on the value of certain items, mainly silver, which could be left out of their safe. And over the years this was increasingly ignored.

They were horrified to discover that after a burglary at the home of friends, the insurance company would not pay out because the teenage son had forgotten to set the alarm before going to bed. It then dawned on Phil and Ruth that despite paying hefty insurance premiums, in the event of their suffering a break-in their own cover was next to useless. Apart from being under-insured, they were also in breach of the terms of their policy because they had more than the permitted value of items in a display cabinet.

Realising that their situation was foolhardy, they decided to take action and approached an insurance broker with a company that had a thorough understanding of the antique and art markets. Instead of being covered by a standard household contents policy, they were now insured under a specialised valuables policy. Much to their surprise, they were able considerably to increase their cover while reducing their premium. Furthermore, there were no restrictions on the value of items that could be left on display - and they were also covered in the event of failing to set the alarm at night, or when leaving home.

Not only were there no annoying restrictions, but, in the event of an item being broken, the company would pay for its restoration and reimburse the difference between its value before and after restoration.

It is not just antique collectors who can benefit from specialised cover. David Needham, of the insurance brokers Needham Jobson, considers that most people who have home contents of pounds 75,000 or more could take advantage.

"This is because at this level their contents will inevitably include art and antiques," he says. Petty criminals find consumer durables such as videos more appealing; consequently the premiums for fine art are lower. The savings can be enormous. David Needham says: "In central London, with a standard policy, pounds 100,000 of cover could cost as much as pounds 1,550; with a specialist policy it could be as low as pounds 200."

Insurance companies are in the business of making money, so how is it that more can be insured for less? The main reason is what the insurance companies call a reduced "moral hazard". This is a polite way of saying that home-owners with a high value of contents are less likely than average to make false claims. They are also more likely to be more security-conscious.

Do not make the mistake of thinking that the lower premiums for specialised cover mean a lower level of service. In fact, it is much higher than with a standard policy.

Whether arranged direct with an insurance company, or through an insurance broker, the client is treated as an individual. Before a quotation is given, the customer will be visited at home and their precise requirements discussed. While this may sound like an unnecessary nicety, it allows for an assessment of an essential element - the insured's lifestyle. A home that has people living in it for most of the time is less likely to be broken into than one which is left unoccupied during the day, at evenings or at weekends. Similarly, a dog or good 24-hour porterage in an apartment block can keep burglars at bay. On the other hand, home-owners who are casual, in the sense that they leave windows open or allow unknown workmen in the house unsupervised, are more likely to suffer losses.

With a specialised policy, the cover of contents is on a system of agreed values. This means that in the majority of cases, any claim for losses is met immediately and in full. Although not a strict policy in all cases, specialist insurers often prefer the contents to be professionally valued in cases where there is a high proportion of antiques.

Since valuers can charge around pounds 600 a day for their services, this does increase the outlay in the first year. However, even with this additional expense, specialist cover can still prove to be less expensive than standard cover from year one.

Insurance companies: Cox Underwriting Services Limited 01608 648000; Nordstern Art Insurance 0171-626-5001. Brokers: Needham Jobson & Co 0171- 839-8340; Realty Insurances 0171-499-7874; HSBC Gibbs 0171-661-2386