Myth #1: My homeowners’ policy covers all of the artwork in my home
Regardless of the overall policy limit, homeowners’ policies generally cap limits on “contents” coverage. In addition, the value of covered items may be subject to depreciation; a deductible will likely apply in the event of damage; and art may not be covered during transport. All of these restrictions could mean denied claims in the event that something happened to your artwork.
Fortunately, distinct insurance policies are available for collections of fine art, jewelry, wine, antiques and other precious items. Independent insurance agents or brokers can point you to the best-in-class carriers. Look for a policy that includes: coverage for all types of collectibles and art media, worldwide protection, immediate coverage for new acquisitions, coverage for restoration and depreciation in value, coverage for items in transit, protection for flood, earthquake, wildfires and windstorm.
Myth #2: Art insurance only helps me if I have a claim
Insurance providers with fine art capabilities may offer access to services that help preserve the value of your collection and reduce the chance of having a claim in the first place. When shopping for insurance, look for a provider with fine art expertise on staff. Services can include: vulnerability assessments and loss-mitigation advice, disaster planning for areas prone to wildfires, hurricanes, etc. and hands-on claims assistance. Insurance companies often work with professional art advisors who, on behalf of their clients, can liaise with the insurance company to manage the claims process in the event of a loss.
Myth #3: An art insurance policy increases my tax burden
Collectors usually encounter a taxable event when they purchase an item (sales tax); sell an item at a profit (capital gains tax); have a taxable estate (estate tax); or exceed their lifetime gift allowance (gift tax). Contrary to popular belief, the presence (or absence) of insurance will not impact the tax requirements tied to these scenarios.
Katja Zigerlig is Vice President, Art, Wine and Jewelry Insurance for AIG Private Client Group, a division of the member companies of American International Group, Inc. (AIG).