We all know that insurance is invaluable: for protecting your home, your car, and of course your health. But did you know that you can also insure your art collection? Taking out an insurance policy may not be the first thing on your mind when you buy a painting or sculpture, but it’s worth considering, particularly as your collection grows in value. We asked art insurance expert Katja Zigerlig to discuss three art insurance realities that new art collectors should know about.
1: Your Homeowners’ Policy May Not Adequately Cover Your Art Collection
Most homeowners’ or condo policies cap the amount of coverage they provide for the contents of your residence, including your art collection. In other words, your art collection may be worth more than the amount covered by your homeowners’ policy. In addition, the value of items covered by your policy may be subject to depreciation.
On homeowners’ and condo policies, a deductible often applies in case of damage to an artwork. Additionally, your art may not be insured during transport which is problematic. Damage to an artwork is most likely to happen when the work is being packed, shipped or handled.
Specific insurance policies are available for collections of fine art, jewelry, wine, antiques and other precious items. These policies take into account the unusual, unique nature of artworks and the fact that they may require more care (i.e. expensive conservation treatments), and may be more difficult to replace, than ‘contents’ items.
When considering insuring your collection, look for a policy that includes the following:
- Coverage for all types of collectibles and art media;
- Worldwide protection;
- Coverage for new acquisitions;
- Coverage for items in transit;
- Coverage for conservation treatments;
- Coverage for depreciation in value.
Depending on where you live, you may also need specific protection for flood, earthquake, wildfires and windstorm.
RELATED: The Impact That The Physical Condition Of An Artwork Has On Its Financial Value
2: Fine Art Insurance Carriers Can Provide More Services Than Just Underwriting Your Art
Even when they appear to offer similar products, insurance carriers differ in their individual approach. Insurance carriers who underwrite fine art and other collectibles often offer access to services that help you preserve the value of your collection. This is a great benefit to collectors because it may help reduce the chance of having a claim in the first place.
For example, their fine art experts can provide you with advice on how to manage and protect your art and collectibles, such as risk assessments for individual works or your entire collection. Additionally, insurance carriers usually have a large network of art world experts who they can put you in touch with (i.e. for acquisition, sales, collection management, conservation or transport).
When interviewing insurance brokers and carriers, ask about their experience in handling and resolving art-related claims for existing clients. You want to work with an insurance company who understands art and the art market.
3: Art Insurance And Tax Implications Are Separate Issues
Most art collectors approach acquiring new art objects with both passion and investment in mind. Over the years, it’s quite possible that your art collection (or individual works) may increase in value. Aside from obtaining regular appraisals to help make sure your collection is always adequately insured, it’s good to be aware of potential tax implications.
For collectors with a collection value that creates a taxable estate (in which case estate taxes may be due) it’s wise to consult with a financial advisor or trust & estate attorney to discuss an estate planning solution that makes sense for their situation. Contrary to popular belief, however, the presence (or absence) of fine art insurance normally does not impact the tax requirements tied to these scenarios.