Art insurance: make sure you are properly covered

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No one buys art to do paperwork, but the key to protecting your art collection is good records.

“You really have to know what you have. Maintaining some sort of an inventory, especially one you can access in the event of a catastrophic loss, is really important because if you don’t know what you have, you can’t secure the insurance – and then it’s going to be difficult to get a claim paid,” says Mary Pontillo, vice president at insurance brokerage DeWitt Stern. She says it’s easy for collectors to neglect this vital part of collection management, only to have problems when they face a loss.

“The next phase, after making an inventory, is getting an appraisal. We suggest appraisals every three to five years – but collectors are usually pretty against doing that because appraisals can be quite costly,” she says

One option is to only get the top ten most valuable items in your collection regularly appraised. This helps save time and money.

“Most people will have maybe two or three really expensive paintings, and maybe a few expensive prints, and then the items usually go down considerably in value from there – so unless you are an especially big collector, appraising only the top 10 items in your collection can work.”

When it comes to being certain your insurance company will pay a claim, the list of items and updated values will prove to be worth the time and money spent creating and maintaining it. When seeking insurance, it is advisable to talk to a specialist.

“You should make sure you’re working with a specialty broker: there are so many specialty brokers that can help you navigate what the best valuation clause is for you (what you’ll get in the event of a loss) and help you navigate that based on your collecting habits, and your tolerance for getting things like updated values and appraisals.”

She adds that for modest collections – anything under a few million dollars – the easiest, most cost-effective solution is often to go through a high-end homeowners’ product.

“If you only add to the collection a couple of times a year, usually a high end home owner’s product is perfect. Don’t go for a run-of-the-mill home owner’s product; it needs to be one of the higher end carriers. Usually they can take care of your work very easily and it’s usually very cost effective.”

In many cases the carrier will give you a scheduled policy for all your more valuable artworks and a blanket limit for the lower valued items. It’s a perfect solution for many smaller-scale collectors, but Pontillo warns not to make the mistake of having a run-of-the-mill home owner’s policy and assuming your artwork is insured. The majority of those policies have a $1000 or $5000 cap on arts and antiques, which you will quickly exceed.

The bottom line is that it is essential to ask the right questions to ensure that your collection is adequately protected. Pontillo adds that collectors should not be deterred by the fear that proper coverage will be expensive.

“People think that fine art insurance is really expensive because it is insuring expensive things, but it’s actually one of the least expensive insurance products in the marketplace compared to things like real estate and other lines of insurance.”