What to Know When Insuring Your Fine Art Collection
For collectors, both established and emerging, a fine art collection represents significant sentimental value, allocated time, and financial investment. However, many collectors seemingly overlook the importance of fine art insurance, instead assuming other broad-stroke asset insurance plans are able to sufficiently protect their works. It is only after an unexpected incident does the collector realize such plans are insufficient, seeking coverage for damaged works and coming up short. Art advisors know that protecting your collection is imperative; to both preserve the value of and best steward your intentionally curated collection, fine art insurance is a necessity.
Fine art insurance provides additional protection for your valuable assets that other plans simply do not provide. Supported by USPAP-compliant appraisal reports, these policies allow a collector to seek reimbursement for the restoration and lost value of a piece if damaged. Art collectors should be ready for anything; fine art insurance helps to prepare a collector for the inevitable. Many collectors mistakenly consider plans like homeowner’s insurance to be sufficient coverage for their fine art collections, as these policies cover lost or damaged personal property— seemingly perfect for safeguarding art assets. However, this coverage is limited. Such policies constrain coverage, with art insured according to a set amount, or protecting only a percentage of the replacement value. Often, fine art is excluded from coverage if a separate policy is not taken out for each specific work or an addendum to the policy is not made.
Fine art insurance can address theft reimbursement as well as damages, considering restoration and loss in value. Through the avenue of fine art insurance, a collector is uniquely aware of the amount of indemnification to which they are entitled; an assessment which can be maintained through updated appraisal reports over time, accounting for market adjustments. These appraisals, which are the obligation of the collector, can be submitted to a fine art insurer, allowing for the indemnification and premium values to balance according to the fluctuating value of each insured work. It is advised that collectors obtain renewed appraisals every one to five years, depending on the value of the collection, and the state of the market, among other factors.
Best Practices for a Collector
1. Avoiding Confusion: Most collectors are unfamiliar with the many facets of fine art insurance when seeking coverage for their collection. The intricacies of insurance plans are baffling even when considering general coverage; so what, exactly, should you be seeking from a fine art insurer?
First, you are insuring your artwork for repair or replacement. Should a work in your collection be stolen or entirely destroyed, fine art insurance will provide reimbursement according to the assessed value of the destroyed or lost work. Be sure to consider the value of a work’s frame, as well. Some frames, based on their age, may carry significant replacement value and should be assessed.
The role of appraisal is emphasized here; collectors ought to be reimbursed according to the most updated value of their works. Art has a propensity for appreciation, and often a collector’s initial investment is only a portion of what an artwork comes to be worth over time. For a collector to best ensure the most accurate reimbursement, updated appraisal reports must be submitted regularly to your fine art insurer. If you are insuring a brand-new addition to your collection, be sure to obtain fine art insurance for the work prior to delivery. Art is most often damaged in transit, affecting value.
Secondly, consider purchasing title insurance for your collection. Such insurance protects against losses occurring in cases of fraud, protecting collectors should their works be inauthentic or face issues of provenance—being looted or even stolen. Here, diligent record-keeping is underscored. Insurers will seek documentation recording the provenance and authenticity of your artwork.
2. Organization and Record-Keeping: As is the case with any matter regarding stewardship of one’s art collection, record-keeping is essential. As a collector begins the fine art insurance process, the necessary documentation is gathered, demonstrating ownership. These documents address the provenance of your collection and are used to assess value. Such records include proof of ownership, bills of sale, conservation reports, photographs, and appraisal reports. It is advised that collectors acquire an updated insurance appraisal prior to consulting with a fine art insurance specialist, so you are able to provide the most recent, best assessment of your collection’s value.
When working with a fine art advisor prior to consulting a specialty insurance professional, collectors avoid complications in record-keeping. Advisors help collectors gather photographs and documentation to create a working catalogue of their collection, ensuring digital copies of these records are made. Having accurate information distinguishes a collector as being a “lower risk,” within their insurance policy, as well. Thorough documentation will help support consistent future appraisals, updating your fine art insurance in accordance with the changing market value of your collection.
3. Considering Works with Sentimental Value: Often, collectors feel that objects in their collection may not need, fine art insurance. Perhaps these are works that have only sentimental value (e.g., family portraits). There are options available for collectors looking to protect works of personal importance. This is often determined by the reproduction cost of a work— that is, how much it would cost to obtain a new, exact replica. Such protections are typically delineated in a policy negotiated separately from the larger collection and should be supported up-front by an updated appraisal reflecting reproduction cost.
4. Preventative Measures: When considering casualty insurance for fine art, insurers will likely request collectors assess relevant risks to the collection and create a strategy for protection. This forces collectors to consider in-home conditions which may damage artworks (humidity, temperature, sunlight, and smoke, for example), as well as relevant environmental emergencies, security systems, and installation and transportation processes.
In cases of environmental emergencies like natural disasters, formulating a plan can help collectors avoid damages to their works entirely. When evaluating the present risks to your stored and displayed collection, consider what strategies you can implement. Perhaps you live on the coast, making your collection vulnerable to water damage during hurricane season. After obtaining adequate fine art insurance, a fastidious collector will form a removal and storage plan to affirm the safety of their collection during high risk-periods. This can be applied to collections in areas vulnerable to wildfire, flooding, or earthquakes, among other natural risks. Taking care to protect your collection from preventable damage will help to reduce insurance premiums, as well.
Even the most vigilant collector is vulnerable to accidents or casualty which may damage the value of their collection. A fastidious collector will work to mitigate the cost of this damage through the solicitation of service from a fine art insurer, who is able to dedicate unique and personal attention to the preservation and valuation of your collection. Supported by regular appraisals which update the retail replacement value of your collection over time, allowing for the best reimbursement possible in case of emergency, collectors are able to preserve the value of their collections, acting as stewards for works that hold not just monetary, but personal value.
By Astrid Bridgwood
This article is written for informational purposes only. Please consult with your agents (insurance brokers, attorneys, accountants, wealth managers, etc.).