WHAT IS Consignment Insurance
Consignment Insurance is a type of insurance that covers loss or damage to items that are on consignment, loan, up for auction or in the process of transfer. The insurance will pay out only if the damage or loss is incurred while the property is not currently held, maintained or cared for by the owner. This is a separate form of insurance from that which covers items held in-house as inventory.
BREAKING DOWN Consignment Insurance
Consignment insurance is part of a broader class of gap insurance policies meant to provide coverage for times and situations where more mainstream policies would not typically pay out. Consignment insurance can cover art that is loaned out to a gallery, automobiles sold at a consignment dealership, items under review for auction or transfer of ownership.
How Consignment Arrangements Work
Consignment is an arrangement in which goods are left in the possession of another party to sell. Typically, the consignor receives a percentage of the revenue from the sale; sometimes these represent a very large percentage. Consignment deals are made on a variety of products, such as artwork, clothing and accessories, and books. Consignment shops have become trendy, especially those offering specialty products, infant wear and high-end fashion items. Millennials are known for their frugal shopping habits, which include eschewing high-end stores and designer boutiques for the bargains found at thrift and consignment shops.
A person wishing to sell an item on consignment delivers the item to a consignment shop or a third party to do the selling on his behalf. Before the third party takes possession of the good, an agreement must be reached as to the revenue split when the good is sold. Most consignment shops have standard fee schedules that indicate the percentage of the sales price that is paid to the shop and the percentage paid to the seller. However, many consignment shops are willing to negotiate, particularly for larger-ticket items, such as artwork.
Consignment arrangements typically are in effect for a set period of time. After this time, if a sale is not made, the goods are returned to their owner. Alternatively, the consignment period may be extended upon mutual agreement.
Selling on consignment is a great option for an individual or business that does not have a brick-and-mortar presence, although consignment arrangements can also exist in cyberspace. To a certain degree, online companies such as eBay are consignment shops; for a percentage of the sale, they offer people a marketplace to exhibit and sell their wares.