You take out insurance on your car and home—why not your art collection, too?

A common myth is that the collection needs to represent so many pieces or be valued at a certain dollar amount in order to be worth insuring. The good news is, there are no minimums here. There are different policies for a reason, just like you might insure a cottage in a hurricane-prone zone differently than a mansion in the Northeast. If the art is important to you—whether because of financial value or emotional connection—consider art insurance. After all, while you may treat your art with care, there is no guarantee you can protect valuable works from damage inflicted by others or even the wrath of Mother Nature. The effects of water damage, excessive sun or a disastrous fire could require pricey restoration. Or, worse yet, theft or damage might occur as a result of shipping to a museum, auction house or dealer, or simply relocating during a move.

What is a Fine Art Insurance Policy?

Typically, a fine art insurance policy covers collectibles, art, furnishings, decorative objects, rugs and tapestries, and antiques. Axa XL and CHUBB are two popular companies with a track record of appraising and insuring fine art.

“A dedicated Fine Art insurance policy usually differs from the coverage offered as a sublimit within a Property policy in a few ways,” Kyle McGrath, Deputy Global Fine Art Practice Leader at AXA XL, explains. “Firstly, a standalone Fine Art policy might contain a very low deductible, or possibly no deductible at all, depending on the exposures. In contrast, a Property policy usually has a very high deductible, which could easily surpass the value of a single object on the schedule. Secondly, Fine Art policies cover both restoration costs and any depreciation in value as a result of a covered loss, whereas many Property policies do not contain this specific language and therefore may not respond to a loss in the same manner.”

“Fine Art insurance carriers, like AXA XL,” says McGrath, “usually have a dedicated Claims team with expertise in Fine Art, along with strong industry relationships with the best adjusters and conservators, both of which are critical to the proper handling of a Fine Art insurance claim.”

And you might want to think twice before going rogue and signing up for a policy online, without consulting an expert first. Would you become your own financial advisor with your retirement funds? How about your own auto mechanic? Experts armed with years of experience in the art insurance industry are there to help guide you. “A good fine-art insurance carrier will likely have an informed and educated claims manager with strong relationships in the industry,” says McGrath, “providing access to the best restorers, conservators and adjusters—which might be difficult for a client to access on their own.”

The Dangers of Uninsured Art

Before we dive into why you should take out an insurance policy for your art, it’s important to understand what will happen if you don’t. “The financial impact associated with a Fine Art loss can be quite sizeable when you take into consideration both restoration fees and depreciation in value—most Fine Art insurance policies will cover both of these costs,” says McGrath. 

Because most art is stored or exhibited alongside other art, there’s often a ripple effect with damage. “The possibility for a loss to impact multiple works or even an entire collection is very real,” says McGrath, “more so in this day and age where major natural catastrophe events are seemingly becoming more and more common.” Taking out an art-insurance policy protects the collection’s value and integrity as a whole. 

Not insuring art can also put a major dent in one’s financial future. “For private collectors, often times the art collection is used as an investment vehicle and/or represents a significant portion of their assets when looking at their overall net worth,” says McGrath, “so the lack of insurance protection in the case of a large loss event could severely impact their financial standing.” 

How Much Does Fine Art Insurance Cost?

Again, just like with auto and home insurance, there is no flat fee for insuring art. This is because art insurance is very customized to not only the objects you own but the type of coverage you prefer. “Art insurance costs vary greatly, depending on a number of factors, including but not limited to the client profile, type of art, size of risk and personal characteristics of the building where the art is kept, and the location of that building,” says McGrath. “As Fine Art policies are typically written on an All Risks basis, it is important to pay close attention to the specific exclusions listed in a coverage proposal, along with the sublimits offered for Transits and Un-Named Locations.” 

Money aside, can you really afford not to insure your art? With the exception of prints (where an etching still exists) or sculptures (arising out of a mold or cast), these one-of-a-kind pieces simply cannot be replaced or obtained ever again.

Documenting Art Purchases

Similar to other major purchases you’ve made, do not discard any receipts—hard copy, email or otherwise—when acquiring art. Not only is this information useful for the person you may eventually sell it to, insurers will want to see a purchase record and history as well. Keeping organized records also helps to appraise the art at a fair value. Even if you begin with a paper trail, do what you can to digitize as much as possible so you can easily, in an email, share these results with an insurer. You also don’t want to lose those receipts over time.

The Process of Appraising Art

Just like you’d expect from Sotheby’s, Christie’s or other auction houses, your items need to be appraised to help you determine the value of what you are insuring. You can also find an appraiser in your area via the Appraisers Association of America. On the website there is even a handy tool that assists in finding one in your area, or by specialization (such as “pottery and porcelain,” “African American-Art” or “19th Century European Paintings, Drawings & Sculpture”).

“Insurers typically look for proof of value in one of two ways, either recent appraisals conducted by a reputable and known appraiser or auction house, or recent invoices/proof of purchase from the dealer or auction house when the art was bought by the client,” says McGrath. “Each insurance company will have their own stance on how recent these valuations must be and it often depends on the nature of the work itself and whether that particular artist’s work or medium has been prone to recent fluctuations in value. 

How Does Art Insurance Work?

While you never hope to file a claim, you may have to for reasons outside of your control. What can you expect to be covered? First, know that the policies are written as either Damage or All Risks of Physical Loss. 

“Unless a particular peril is specifically excluded in the policy wording,” says McGrath, “it will likely be considered a covered loss. Theft and accidental damage are commonly covered claims as they fall within this All Risks definition and are usually not excluded. However, mysterious disappearance is sometimes excluded, depending on the nature of the risk.” 

In short, are you prepared for the risk of an uninsured art collection? What will you do if some or all of your collection is lost, stolen or damaged and how will this affect your financial standing? Seeking professional guidance on how to insure your collection while you are not in a state of distress or—worse—after the damage or loss has occurred—allows you to make better decisions, ultimately protecting your bank account and your most coveted art.

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Looking for more? Read our guide to Disaster Planning for Your Art Collection.

Featured image via Deanna J.