FAQs: Fine Art Insurance, Part 2
To follow on our previous post on fine art insurance, we thought we would dive a bit deeper into some common questions our clients may have about their policies, with help from Mary Pontillo at Dewitt Stern, A Risk Strategies Company.
How often should I have my collection appraised?
With a fine art insurance policy in place, it is important to ensure you have proper documentation of the value of your collection in the event of a claim. You should conduct an annual audit of your collection for your records, keeping a list of your inventory, where it is located, and noting the estimated values. It is a good idea to keep this list saved in the cloud through a service like Dropbox or Google Drive, in case the physical list or computer are destroyed.
Brokers recommend a formal appraisal of your collection every 3-5 years to update the current market values of your work. If it is not possible to get the whole collection appraised, at least try to have the top ten most valuable items appraised regularly. This will often cover the bulk of your collection’s value.
For insurance purposes, a valuation can take the form of an independent appraisal from a specialized appraiser – the Appraiser’s Association is a great resource for finding an appraiser in your local area. Otherwise, proof of updated value can also take the form of a letter from the gallery or dealer who sold you the work, or an auction house appraisal.
Your policy will be updated to cover the full value of your collection, making sure you have enough coverage in the event of a total loss.
How does my insurance policy account for the appreciation or possible depreciation of my collection?
Obtaining regular valuations and updating the values scheduled on your insurance policy is the best way to ensure you will be fully covered for your losses in the event of a claim, especially if your collection may be rapidly appreciating in value.
It is important to know that there are several valuation options in a fine art insurance policy.
Some fine art insurance policies are written on a Current Market Value basis – sometimes referred to as Fair Market Value or Retail Replacement Value. In the event of a loss, you will be compensated based on the current marketplace on the date the loss occurred. At the time of the claim, the claims adjustor will use any appraisals and sales invoices you are able to provide, and conduct additional research or obtain additional appraisals to determine the Current Market Value.
Some policies offer valuation at “Scheduled Value,” which allows you to lock in an agreed upon value for an artwork as listed on the schedule of items in your contract, based on a recent appraisal or sales invoice. In the event of a claim, you will be paid out the value listed in your agreement – even if the work has depreciated. However, if your work has appreciated in value, the insurance company will still only pay you up to value listed on the schedule.
Finally, some policies feature the clause “Scheduled Value or Current Market Value not to Exceed 150% of the Scheduled Value,” which will protect you from depreciation as described above, and also cover the appreciation of your artwork up to 1.5x the value listed in your agreement. With this kind of valuation option, it is important to still update the value of your collection regularly – if you experience a total loss and your collection has appreciated dramatically, you may not have enough total limit on your policy to accommodate the current value of your collection.
I am actively buying more work – how can I be sure my policy will cover my collection as it grows?
Your policy will have a “Newly Acquired” clause, which dictates the amount of time you have to notify your broker of any additional purchases to ensure that they are covered. Generally, this time frame is 60-120 days. Be sure to consult your broker to confirm your specific policy requirements.
Should I let my insurance broker know when I move my artwork to a different location or to storage?
Yes. It is very important that any location in which you are keeping artwork is listed on your fine art insurance policy, including your residences, as well as your fine art storage provider. Many policies only have a small sub-limit – or no coverage at all – for artwork that is moved to an unlisted location.
In addition, it is important to remain aware of your distribution of risk – if you move all of your artwork to one home, the risk will become concentrated and you may not be fully covered in the event of a total loss.
FAQs: Fine Art Insurance, Part 2
October 31, 2016
To follow on our previous post on fine art insurance, we thought we would dive a bit deeper into some common questions our clients may have about their policies, with help from Mary Pontillo at Dewitt Stern, A Risk Strategies Company.
How often should I have my collection appraised?
With a fine art insurance policy in place, it is important to ensure you have proper documentation of the value of your collection in the event of a claim. You should conduct an annual audit of your collection for your records, keeping a list of your inventory, where it is located, and noting the estimated values. It is a good idea to keep this list saved in the cloud through a service like Dropbox or Google Drive, in case the physical list or computer are destroyed.
Brokers recommend a formal appraisal of your collection every 3-5 years to update the current market values of your work. If it is not possible to get the whole collection appraised, at least try to have the top ten most valuable items appraised regularly. This will often cover the bulk of your collection’s value.
For insurance purposes, a valuation can take the form of an independent appraisal from a specialized appraiser – the Appraiser’s Association is a great resource for finding an appraiser in your local area. Otherwise, proof of updated value can also take the form of a letter from the gallery or dealer who sold you the work, or an auction house appraisal.
Your policy will be updated to cover the full value of your collection, making sure you have enough coverage in the event of a total loss.
How does my insurance policy account for the appreciation or possible depreciation of my collection?
Obtaining regular valuations and updating the values scheduled on your insurance policy is the best way to ensure you will be fully covered for your losses in the event of a claim, especially if your collection may be rapidly appreciating in value.
It is important to know that there are several valuation options in a fine art insurance policy.
Some fine art insurance policies are written on a Current Market Value basis – sometimes referred to as Fair Market Value or Retail Replacement Value. In the event of a loss, you will be compensated based on the current marketplace on the date the loss occurred. At the time of the claim, the claims adjustor will use any appraisals and sales invoices you are able to provide, and conduct additional research or obtain additional appraisals to determine the Current Market Value.
Some policies offer valuation at “Scheduled Value,” which allows you to lock in an agreed upon value for an artwork as listed on the schedule of items in your contract, based on a recent appraisal or sales invoice. In the event of a claim, you will be paid out the value listed in your agreement – even if the work has depreciated. However, if your work has appreciated in value, the insurance company will still only pay you up to value listed on the schedule.
Finally, some policies feature the clause “Scheduled Value or Current Market Value not to Exceed 150% of the Scheduled Value,” which will protect you from depreciation as described above, and also cover the appreciation of your artwork up to 1.5x the value listed in your agreement. With this kind of valuation option, it is important to still update the value of your collection regularly – if you experience a total loss and your collection has appreciated dramatically, you may not have enough total limit on your policy to accommodate the current value of your collection.
I am actively buying more work – how can I be sure my policy will cover my collection as it grows?
Your policy will have a “Newly Acquired” clause, which dictates the amount of time you have to notify your broker of any additional purchases to ensure that they are covered. Generally, this time frame is 60-120 days. Be sure to consult your broker to confirm your specific policy requirements.
Should I let my insurance broker know when I move my artwork to a different location or to storage?
Yes. It is very important that any location in which you are keeping artwork is listed on your fine art insurance policy, including your residences, as well as your fine art storage provider. Many policies only have a small sub-limit – or no coverage at all – for artwork that is moved to an unlisted location.
In addition, it is important to remain aware of your distribution of risk – if you move all of your artwork to one home, the risk will become concentrated and you may not be fully covered in the event of a total loss.
What precautions should I take when I loan artwork to a museum exhibition or consign it to a gallery?
Your broker is a valuable resource. They are available to review any loan or consignment agreements to confirm that the insurance program offered by the museum or gallery you are working with will provide you with sufficient coverage in the event of damage or loss. They will also arrange to have you listed as Loss Payee and an Additionally Insured Party on the institution’s policy.
Damage is most likely to occur when an artwork is in transit, so it is important that the gallery or museum uses a reputable packer and shipper like UOVO. Confirm that your work will also be covered by the borrower’s policy during transit, and be sure that a condition report is completed before and after the work travels to inspect for any damage. If the work is of a very high value, you may consider requesting a courier to travel with the work.
Alternatively, you may choose to cover the work under your existing insurance policy, but be sure to list the museum or gallery as a schedule.
What precautions should I take when I loan artwork to a museum exhibition or consign it to a gallery?
Your broker is a valuable resource. They are available to review any loan or consignment agreements to confirm that the insurance program offered by the museum or gallery you are working with will provide you with sufficient coverage in the event of damage or loss. They will also arrange to have you listed as Loss Payee and an Additionally Insured Party on the institution’s policy.
Damage is most likely to occur when an artwork is in transit, so it is important that the gallery or museum uses a reputable packer and shipper like UOVO. Confirm that your work will also be covered by the borrower’s policy during transit, and be sure that a condition report is completed before and after the work travels to inspect for any damage. If the work is of a very high value, you may consider requesting a courier to travel with the work.
Alternatively, you may choose to cover the work under your existing insurance policy, but be sure to list the museum or gallery as a scheduled location on your policy.