Stories of natural disasters, heists, and property damage affecting valuable artwork reveal how crucial art insurance could be in recouping the value of damaged or lost art. Homeowners and renters insurance policies may provide sufficient coverage if you are an art collector or artist with fine art holdings cumulatively valued in the low four figures. You may also be able to purchase a fine art floater to your standard insurance plan, which provides additional coverage for art. However, for more substantial fine art holdings, you may want to consider specialized insurance coverage for your art. Specialized art insurance provides even more financial protection for art, combined with greater expertise in appraising art, making recommendations to minimize harm to art, and negotiating art insurance claim settlements.
Types of Specialized Art Insurance
(1) Property Insurance
Property insurance protects artwork against theft, loss, and/or damage. Insurance policyholders should carefully review the terms of their own insurance policy to confirm what is specifically covered under the policy. Property insurance policies may be designed to cover entire art collections or specific works of art. For example, a property insurance policy may have a theft provision covering the entire art collection against theft. In the event of theft of any piece(s) in the art collection, the insurance company would compensate the policyholder up to a specified amount for the incident, regardless of the value of the specific work(s) stolen. Owners of artwork should examine their property insurance policy to determine whether the insurance company covers restoration costs, art maintenance fees, and/or loss in value in cases involving property damage. Additionally, owners of works of art that are frequently moved should examine their property insurance policy to make sure insurance covers damage while the works are being transported and stored.
(2) Title Insurance
Title insurance “reimburses policy holders for the value of works that may be lost to title claims.” A seller may not have full authority to sell the work because it was stolen or has a lien placed on it, for example. A buyer who purchases the work from this seller may be subject to a title claim from the original owner who holds full and legitimate rights to the work. Even a buyer who sincerely believes that he or she purchased the artwork with legitimate title “will not only be forced to return the piece of art to its rightful owner, but also lose the purchase price he or she paid for the artwork.” Title insurance addresses such risks by the covering legal costs of defending title claims and compensating the policyholder for a specified value of the works if the policyholder loses the title claim.
Art Insurance in the News: Art Damage After Superstorm Sandy
Many New York art galleries were adversely affected by Superstorm Sandy, a severe storm in November 2012 that caused significant destruction of property from flooding and water damage and disrupted business operations. Art insurers have assured gallery owners that “all claims for lost or damaged art covered by personal or commercial policies should be handled with ease.” This is in contrast to the uncertain position of commercial liability insurers that cover risks to facilities, such as damage to floors, walls, equipment, and furniture. Standard commercial liability insurance policies commonly exclude coverage for damage due to flooding but include coverage for damage due to winds and sewage problems, so it is yet to be determined whether New York art galleries will be fully reimbursed for their facility losses from Sandy. Given the stress and frustration involved in rebuilding a business in the aftermath of a destructive natural disaster, the relative dependability and consistency of insurance coverage for at least the works of art is reassuring to art owners and art dealers.
Tips For Insuring Your Art
- Understand the terms of your insurance policy. Know what art your insurance policy covers, and under what circumstances and for how much financial coverage. Also know what specific circumstances are excluded from insurance coverage. Know that you are able to customize your insurance policy by adding supplemental coverage and negotiating specific levels and types of coverage for your artwork.
- Take precautionary measures in addition to insurance coverage. Your art insurance premiums also depend on the risk profile of the art being insured. Installation of a good security system for your art not only provides an additional level of protection from theft, but could also reduce your art insurance rates.
- Engage in periodic appraisals of your insured artwork. Similar to the process of valuing real estate for insurance coverage, specific works of art are valued based on factors such as “selling price, material cost, and/or the appraised value.” Periodic appraisals, occurring every three to five years, of insured artwork are recommended to account for gains and losses in market value, consequently affecting insurance premiums and coverage amounts.
- Document your art collection. Keep photographs of the insured artwork, appraisal documents, sales receipts, and other paperwork related to the valuation of your artwork so that you may refer to these documents in the event of making an insurance claim.