I insured my crypto-punk NFT and my modern basketball cards at the peak of 2021. My policy limit says $50,000. Today, the collection is worth maybe $15,000. If my house burns down, do I get the $50k I’ve been paying premiums on, or the $15k market value?
Key Takeaways
- Agreed Value Wins: If you have an “Agreed Value” policy, you get the full $50,000. This is the only hedge against a market crash.
- Market Value (ACV) Loses: If you have a standard policy, you get the current market value ($15k). You effectively wasted money paying premiums on $50k coverage.
- The 150% Cushion: Some high-end policies (like Chubb) pay up to 150% of the insured value if the market spikes, but they don’t penalize you if it crashes (if Agreed Value).
- Re-Evaluation: If you have ACV coverage, you should lower your coverage limit as the market drops to save on premiums. If you have Agreed Value, keep it high to protect your “investment.”
The “Why” (Indemnity vs. Contract)
Agreed Value: “In the event of total loss, we will pay the amount listed in the schedule.” (Contract payout).
Market Value: “We will pay the cost to replace the item.” (Indemnity).
The Investigation: The Payout Scenario
I asked underwriters about the “Bubble Burst” scenario.
1. Collect Insure (Agreed Value)
- Answer: “If you listed it at $50k and paid for $50k coverage, we mail you a check for $50k.”
- Caveat: They might ask for a new appraisal upon renewal. If they see the market tanked, they might force you to lower the value to avoid moral hazard (you burning your own house).
2. State Farm (Market Value)
- Answer: “We pay what it costs to buy the card today.”
- Result: You lose $35k in “book value.”
Comparison Table
| Market Direction | Agreed Value Policy | Market Value Policy |
| Market Crashes | Pays Original High Value | Pays Current Low Value |
| Market Spikes | Pays Original Value (Capped) | Pays Current High Value |
Step-by-Step Action Plan
- Read Your Policy Header: Does it say “Agreed Value” or “Actual Cash Value”? This is the most important distinction in collectibles insurance.
- Audit Your Schedule: If the market crashed, and you have Agreed Value, keep paying the premium—it’s your safety net. If you have Market Value, lower your limits immediately to stop overpaying.
- Moral Hazard Check: Don’t get any ideas. Insurance fraud investigators look very closely at total losses of assets that recently crashed in value.
FAQ
Can I insure my stocks?
No. You cannot insure financial instruments against loss of value. Collectibles are tangible property, which is why Agreed Value works.
[IMAGE: Graph showing “Insured Value” line staying flat while “Market Value” line drops steeply]