The Finer Points of Insuring Fine Arts

iStock_000008714602XSmallIn addition to all the damaged homes everyone witnessed on the news during the onslaught of superstorm Sandy, insurance companies are reeling from the largest ever payouts for damage to fine arts. According to Insurance Journal, the losses totaling nearly $500 million are essentially the entire art insurance industry’s annual insurance premiums. Consequently, the repercussions may be significant going forward. If you currently have fine art insured (or have fine art that needs to be insured), you will want to pay particular attention to the evolving marketplace for art insurance.

Most standard home insurance policies have a limitation on the amount of fine arts, paintings, and similar articles that may be covered by the personal property limit. The average homeowner does not have a substantial collection of high-value artwork and the policies were designed with that in mind. As a result, the coverage provided in the standard policy can be somewhat limited. If you find that your art collection is in excess of what can be easily accommodated within the standard home insurance policy, you will need to explore more specific coverage.

The simplest way to insure your art is to purchase a floater policy that is designed for high-value artwork. It’s possible that you can get a floater policy from your existing home insurance company and will just need to provide some additional underwriting information. However, you should also be prepared for the possibility that your current insurer may not be willing to write the coverage or that their terms and pricing may not be competitive. This is not necessarily a reflection on you, but more likely has to do with their interest in insuring these items. Each insurance company has a different appetite for different types of risk and sometimes it requires a bit of searching to find the right fit for your needs.

A good source of art insurance information is from your art dealer. Because they deal in the medium every day, they may have information for you on special programs for individuals and might be able to offer a referral. However, keep in mind that the art dealer’s own policy is likely a commercial policy, which will be different from your personal floater. Regardless of how you source the policy, you will likely need to visit an art expert during the insurance process. Instead of simply specifying a value you want for your art, you will need to provide the insurance company with some evidence of its worth.

With newly purchased art, the value can often be ascertained by using the purchase price and invoice. However, you should consider reviewing this on a regular basis. If your art has greatly appreciated in value, you will need to revise your policy’s limits to reflect the higher value and limit. If you do not take this step, you might find yourself underinsured. Many insurance companies will also ask you to provide them with an appraisal to support the value of your artwork.

You will find that fine art insurance is generally reasonably priced (although that might be changing because of Sandy) and the peace of mind that comes with having your personal property properly insured is well worth it.

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