Are you properly insuring and protecting your art?
Many art enthusiasts take pride in protecting their collections against damage or loss, but an alarming number are still uninsured or underinsured, particularly if their collections have not been appraised on a regular basis. In recent years, more collectors have acquired fine art with the intention of investment, even though many owners do not consider declaring their fine art assets to insurers, considering a homeowner's policy to be sufficient. There is no way to prevent accidents, and it is best not to wait until such unfortunate events occur. Art can be covered under a homeowners policy as contents or individual items can be listed in a separate rider to the policy. However, it is also possible to insure art through a separate, specialized policy. Specialists and departments within the insurance industry are dedicated to insuring art and collectibles under custom policies.
Ultimately, it is at the discretion of the individual owner how they insure their art. But it is important that the insured make an informed decision. People erroneously believe, for example, that as long as their possessions are insured at a high value under their homeowners policy, their art will be adequately protected. What they fail to consider is that there is often a per-item limit for valuables included in contents – and those limits can be quite low. In addition to any per-item payout limits, the insured is likely to underestimate the total value of their contents without a proper appraisal. Once art is included as part of the total value of the contents, the content policy limit may not be sufficient.
It is essential that you understand the value of your art assets so you can make informed financial decisions, including how to insure your art adequately.
As with any asset, the value of art fluctuates. However, unlike assets which are fungible and widely traded (e.g. shares of public companies), artwork is unique, and as such establishing its value requires a high level of expertise and knowledge. Appraisers of fine art are specialists in determining the value of artworks and collectibles. Appraisals are used by art owners and insurers to determine the appropriate amount of coverage and to determine the value of the insurance coverage. Both insurers and owners count on credentialed appraisers for comprehensive and independent opinions of value for insured personal property. Therefore, to ensure adequate insurance coverage, owners should ensure that they engage qualified appraisers and that they conduct periodic reviews of their pieces.
Artefact Fine Art provides professional insurance appraisal services. A professional fine art insurance appraisal report will minimize risk of not receiving the full value for your fine art while also ensuring you’re not overpaying for coverage. For insurance purposes you want an appraisal for replacement value, not fair market value. (Fair market value appraisals are appropriate for other purposes, such as valuing art for estate or tax purposes.)
Most people are unaware that a typical homeowners policy does not cover all risks associated with artwork. Considering the limitations of a homeowners policy is only half of the analysis involved in determining whether or not to purchase separate art insurance. Collectors of fine art should consider the features of an art insurance policy that are specifically designed to deal with the risks inherent in the ownership of fine art (such as coverage for breakage) and the nature of their activities. In the case of fine art insurance policies, one should be aware of what is covered and what is excluded from coverage. For example, are art restoration services included? Imagine a fondu skewer puncturing a canvas while you host an event… will you be responsible for the cost if it requires a conservator and how will this affect its value? What about when your art is in transit or moves around, how is it covered then?
Using a fine art insurer also has the advantage of having experts on staff who can offer advice on a variety of different topics: everything from advice on how to store art, to finding qualified shippers, appraisers, and dealers to management of collections, which includes information and advice on temperature, humidity, and light control. The goal of specialty art insurers is to preserve and protect artworks, in addition to reducing the possibility of future losses.
Once you have gone through the steps of appraising and insuring your fine art, generally it is highly recommend keeping insurance appraisals up to date at least every 2-3 years as values change. Do not risk having valuable works of art grossly underinsured because of outdated appraisals. Though the appraisal frequency is contingent upon the specifics of the artwork(s), and it’s best to consult with a fine art appraising specialist, by obtaining insurance appraisals on a regular basis private collectors are more apt to keep up to date with the value of their collection. Appraisers who keep in regular contact with their clients and abreast of art market trends will notify them when specific pieces have substantially increased in value and should be updated accordingly.
As art continues to grow in popularity as a form of enjoyment and investment, insurance brokers should also take the time to ask new and existing clients whose homeowners policies are up for renewal whether they own any new artwork or collectibles they are interested in insuring. People often accumulate quite a lot of art before they realize how large their collection is - and how large their exposure is if all of their art is not adequately insured.