Remember the baseball that Pedro Martinez signed for you or the baseball bat that your uncle got you signed by George Brett? Well, it could be worth a lot. The family heirloom sitting in the living room might be something you don’t notice, but an auction could grab you a pretty penny. Art doesn’t necessarily mean a painting ONLY. You want to display all your collectibles like paintings, memorabilia, etc. but are scared to, for fear of it being stolen. The solution is art insurance.
Suppose you currently own artworks or collectibles worth more than a few thousand dollars. In that case, you should ensure your collection to defend them against the unexpected. Art Insurance coverage provides critical financial protection for collectors if art investment is lost, stolen, or damaged. The specialized all-risk policy goes beyond a typical household property policy. It is often based on the premise that owners want to preserve objects or collections for future generations of family or community.
The first step you need to take is to compile all the documents that came with your artwork purchase. This necessary documentation, also known as provenance, should underline proof of ownership, bill of sale, a replacement estimate, and photographs. This will go a long way in ensuring your artwork as it will provide your insurer with the information of the artwork they will need.
While you never hope to file a claim, you may have to for reasons outside your control. What can you expect to be covered? First, know that the policies are written as either Damage or All Risks of Physical Loss.
“Unless a particular peril is specifically excluded in the policy wording,” says McGrath, “it will likely be considered a covered loss. Theft and accidental damage are commonly covered claims as they fall within this All Risks definition and are usually not excluded. However, mysterious disappearance is sometimes excluded, depending on the nature of the risk.”
Most fine art policies will cover ‘all risks,’ which is a slightly misguided term because there are almost always coverage exclusions. All policies will cover perils like fire and theft while also compensating for the loss of value and accidental damages. Typical policy exclusions include things like war, nuclear, moths & vermin, and inherent vice.
Art Insurance offers you cover from damage or theft of your prized art possession. So, if your art collections suffer damage or are stolen, the insurance provider will offer appropriate compensation.
The typical policy provides protection against all kinds of accidental physical loss or damage, including:
“WALL TO WALL” coverage while:
On-premises (either at home or in the office)
On loan to third parties or on exhibition
In transit (worldwide coverage)
Typical losses covered:
Fire, howsoever caused
Theft and vandalism
Extremes of temperature or humidity
Natural Perils, i.e., Typhoon, Flood, Earthquake,
Valuation based on Agreed Value, i.e., no depreciation
Cost of restoration and depreciation in valuation following a partial loss or damage
Short term or annual coverage
Art Insurance secures the most precious work created against financial damage. The coverage is applicable for all of the insured perils or risks. The following risk does not cover art insurance:
Art Insurance does not cover loss to the insured article due to the aging of its intrinsic material.
Loss to insured art resulting from third-party vandalism or trespassing, unless it happens even after taking the required security measures.
Any loss to insured art due to sudden temperature change, unless it’s due to an insured natural peril like a storm, tempest, or snowing.
Loss to insured art is below the pre-agreed deductible amount in the Art insurance policy.
Loss during the process of making changes or improvements in the art.
Loss art due to intentional recklessness and aging of the material.
Loss Avoidable by adequate security measures.
Loss is due to the change in the atmosphere without the interference of natural peril such as storms or tempests.
Before we dive into why you need an insurance policy for your art, it’s important to understand what will happen if you don’t. “The financial impact associated with a Fine Art loss can be quite sizeable when you take into consideration both restoration fees and depreciation in value—most Fine Art insurance policies will cover both of these costs,” says McGrath.
Because most art is stored or exhibited alongside other art, there’s often a ripple effect with damage. “The possibility for a loss to impact multiple works or even an entire collection is very real,” says McGrath, “more so in this day and age where major natural catastrophe events are seemingly becoming more and more common.” Taking out an art-insurance policy protects the collection’s value and integrity as a whole.
Not insuring art can also put a major dent in one’s financial future. “For private collectors, often times the art collection is used as an investment vehicle and/or represents a significant portion of their assets when looking at their overall net worth,” says McGrath, “so the lack of insurance protection in the case of a large loss event could severely impact their financial standing.”
Again, just like with auto and home insurance, there is no flat fee for insuring art. This is because art insurance is very customized to not only the objects you own but the type of coverage you prefer. “Art insurance costs vary greatly, depending on a number of factors, including but not limited to the client profile, type of art, size of risk and personal characteristics of the building where the art is kept, and the location of that building,” says McGrath. “As Fine Art policies are typically written on an All Risks basis, it is important to pay close attention to the specific exclusions listed in a coverage proposal, along with the sublimity offered for Transits and Un-Named Locations.”
Money aside, can you really afford not to insure your art? With the exception of prints (where an etching still exists) or sculptures (arising out of a mold or cast), these one-of-a-kind pieces simply cannot be replaced or obtained ever again.
Home insurance covers your home’s structure, detached buildings, personal belongings, liability claims, and additional living expenses should your home incur damage from a named peril. Art falls under personal belongings coverage, but that comes with significant caveats. Here are the downsides of using your standard personal belongings coverage for your expensive art.
Personal Property Coverage Limits
Personal belongings protection is limited to 50 to 70 percent of the coverage amount placed on your structure coverage (your house). If your home is worth $300,000, and your insurance covers it for that amount, your personal belongings protection caps at $150,000 – $210,000. This coverage is often sufficient when you consider appliances, clothing, furniture, and other everyday items.
However, if you own original art pieces, you may be surprised by how quickly their value escalates. Multiple pieces add up in value, and if the artist suddenly becomes popular or passes away, your pieces gain value. Replacing clothing, furniture, and appliances can also add up quickly, and before you know it, you do not have personal belongings coverage sufficient for art pieces. If you enjoy your collection, this news can be devastating after a disaster.
Personal Property Sub-limits
Even if $210,000 sounds like a lot of coverage, you face another hurdle. Many companies cap losses of art, collectibles, and antiques. That cap is called a sub-limit, and it applies to specific categories of personal property. Art is one of the sub-limit categories. E.g., jewelry, bicycles, electronics, furs, firearms, and other categories also have sub-limits.
The sub-limit amount for art typically is $2,500 for all your art. You may lose four paintings with a combined value of $12,000 and later learn your art coverage stops at $2,500. Even if you faced a covered event, you are nowhere near fully compensated for that loss.
Personal Property Claims Valuation
Your standard homeowners’ policy (HO3) comes with actual cost value claims valuation. ACV deducts depreciation from today’s cost of the item. You can upgrade to replacement cost valuation (RCV), which allows you to buy a replacement at today’s retail price. However, if you don’t upgrade your policy, ACV will devalue your artwork.
Personal Property Deductible
Every standard home insurance policy comes with a deductible that you set. So, you would factor in the deductible if your art is damaged or stolen.
Your art collection is irreplaceable, and art insurance protects your assets and your investment. It also ensures that, even in the event of a catastrophic claim, you can continue collecting. You’re never expecting something to happen; having insurance gives you peace of mind.
First, make a list of all your collectibles. Get them evaluated by professionals. A complete list is good for you as well as the insurance company if there is a claim or the total value of insurance is to be determined. Once a value has been established, then you can go ahead with the policy cover with adequate coverage and deductible.
Are you prepared for the risk of an uninsured art collection? What will you do if some or all of your collection is lost, stolen, or damaged, and how will this affect your financial standing? Seeking professional guidance on how to ensure your collection while you are not in a state of distress or—worse—after the damage or loss has occurred—allows you to make better decisions, ultimately protecting your bank account and your most coveted art. Let Compareaquote.com assess your collectibles and give you the right quote and coverage.