FAQs: Fine Art Insurance
This September, UOVO sat down with our friends Mary Pontillo from DeWitt Stern, an insurance brokerage firm, and Greg Smith from Berkley Asset Protection, an insurance company, to talk about some common insurance questions we receive from clients as it’s one of the most crucial parts of a risk management strategy for fine art.
The Basics
What is insurance and why would you want to insure your art?
Artwork is often among our clients’ most valuable and personal possessions – and often the most fragile. If a work of art gets damaged or lost, the cost to you could be very high to fix or replace the work. Insurance is the transference of risk from one party to another. For a fee called a premium, you will be compensated by an insurance company for any incremental or total loss if something happens to your artwork in your home, in storage, or while in transit. Having an art insurance policy in place will ensure that your claim can be settled in an expedient manner, with the cost of restoration and/or compensation for your loss paid by the insurance company.
What is the difference between a broker and an insurance company?
Insurance companies are the parties who underwrite the risk and determine the premium to charge you, based on historical data. The insurance company is the party that actually pays claims if damage or a loss is to occur. Brokerage firms work with insurance companies and represent clients. Brokers like Mary have a fiduciary responsibility to their clients to obtain the best coverage at the most competitive price. They distill the jargon for you and act as your representative when presenting your case to the insurance company to obtain insurance. You should work through a broker to obtain art insurance, as art insurance companies typically do not sell insurance directly to clients.
How can I obtain insurance coverage for my artwork?
Sometimes your existing homeowner’s or renter’s insurance policy will already include a provision for some personal property that can include artwork – higher end homeowner’s policies may cover up to several hundred thousand dollars worth of art. It is important to check with your insurance broker whether fine art insurance is included in your policy or can be added on and the maximum value of the work that can be covered.
Even if your artwork is covered under your homeowner’s policy, there are certain features of a specialized art insurance product that may be valuable to you, such as transportation insurance.
Especially if you have a sizable collection, you will want to work with an insurance company that has extensive experience underwriting fine art risk, and the expertise to understand the idiosyncratic risks of a particular artist and medium – their team should be able to look at an artwork and have a good understanding of how damage affects value. In the event of a loss, a great insurance company will work to make the situation far less stressful. They will ask all the right questions and come up with a plan. They will tap into their contacts among the best restorers and service professionals, working to best resolve your claim. If the items you are insuring are personally or historically important, you want to work with a company that has experience handling these types of claims.
A broker can help you obtain an art insurance policy. When speaking to a broker, you will want to ask them how many art-related clients they handle, and what parts of the art world they serve – a single broker can handle collectors, museums, dealers, artists, and even art storage facilities, like UOVO. Their business and service benefit from understanding how the various segments interact.
The Nitty-Gritty
What steps do I need to take after I’ve talked to a broker?
To obtain insurance, you will need to complete an application that outlines the security and fire protection of all of the locations within which you are keeping artwork. Homes in coastal or earthquake prone areas may be more difficult to insure and may require further information.
You will also need to provide a list of items with values, divided by location. For items worth greater than approximately $250,000, an appraisal from a dealer, auction house, or a certified appraisal firm may be required. If you do not have one, your broker will be able to refer you to a recommended appraiser in your area.
Also, if it’s your first time obtaining insurance, you will also need to establish a baseline condition for the collection – either through formal condition reports, a site visit, or photographs. Your broker should be able to facilitate this for you.
Fine art insurance is surprisingly affordable given the level of care and service provided. For a collector, the general rule of thumb for premiums is $1,000 annually per $1 million of artwork (0.1% of the value).
Besides insurance, what other risk management precautions do Greg and Mary recommend taking?
1. Ask for guidance from the network of experts around you: the dealer or auction house who sold you the work, your broker, and your art services providers can provide insight on how to best care for your collection and avoid damage to your art.
2. Address issues before they arise: for example, if you are getting ready to remodel a home, ask your insurance providers to take a look at the alarm and floor plans – it is much easier to fix something before it is installed. Insurance companies inherently want to minimize the risks you are exposed to. They are always happy to come to your home or anywhere else you may keep art and give you recommendations on how and where to install work, including assessing the security and environmental conditions.
3. Have a collection management system: it will help you keep track of where everything is, between homes and in storage, and can also help you keep track of values to better understand your risk.
4. Condition report when items are coming and going, especially if you are lending items often. It’s the best way to catch damage as soon as possible, and resolve claims faster.
5. If you are storing your artwork, vet the warehouse and ask your broker for guidance. Get to know the management team to understand their experience and capabilities. Understand who has access to the area in which your art is kept. And very importantly, get a sense of how the employees feel – they’ll be coming into your home and handling some of your most important possessions – make sure they are treated well by the company.