If the last time you thought about art insurance – or maybe the only time – was when you watched the movie “The Thomas Crown Affair”, then it’s time for you to think about it again.
More and more people are buying art for personal enjoyment or a form of alternative investment. Regardless of the type of art you own or reasons for collecting it, art likely holds both a monetary and emotional value. You would hate for anything to happen to it, such as theft, fire or a natural disaster. Besides keeping it in a safe place, what else can you do to protect it?
What is Art?
Without getting into the philosophical question of “what is art” or whether particular objects are art – when talking about insuring art, the first issue to consider is what types of objects are we talking about. The definition of art is quite broad: it includes jewellery, china, ceramics, vintage cars, musical instruments, paintings, drawings, photographs, textiles, sculptures, rare stamps, coins, books and manuscripts, sports memorabilia, antiques, and so on. Basically, anything that can be bought or sold at auction.
Homeowners’ versus Art insurance
There is a common misconception that art can be adequately covered under a standard homeowners’ insurance policy. The reality is that Home Insurance policies either specifically exclude artwork or limit the coverage to an extent that it might as well not be covered. Most Home Contents Insurance policies have a “per item” limit that can be quite low (for example S$ 2,000) and do not cover all the specific risks related to art. While homeowners’ policies covers risk such as fire, theft and water damage, for example a peril like breakage of fragile articles is generally excluded.
We at Insurance Market recommend to take out a specialised Art Insurance policy that provides coverage on “all risks basis”, which means exactly what it sounds like: the policy covers anything that could happen to the art (subject to certain usually relatively limited exclusions) including theft, accidental damage, fire or water damage, exposure to extreme temperature or humidity and other natural causes.
Unique Nature of Art Requires Special Coverage
Due to the unique nature of art special consideration has to be made for the following special conditions:
1. Basis of valuation and Loss settlement
You probably want a policy that covers both replacement, which covers the art if it is stolen or completely destroyed, and restoration, if there is partial damage that can be repaired. Another consideration is cover for lost value, such as a required repair that reduces the market value of your piece.
At Insurance Market recommend insuring art for its replacement value, not for the original cost. This involves getting your art appraised on a fairly regular basis, from once a year to every few years, depending on the nature of the work, because the value of art can appreciate over time. When engaging a professional appraiser, make sure he knows that the appraisal is for insurance purposes.
Of course, one-of-a-kind art pieces that are stolen or destroyed can’t be replaced: the chance of recovery of art after a theft is less than 10 percent. But you do want to be compensated for your monetary loss.
2. Art Often Gets Moved Around
A good example of a unique aspect of art collecting is the fact that pieces of art are often moved. “Art is meant to travel”. Pieces are often moved between homes or to and from off-site storage, or send off to museums and galleries for shows and exhibitions, or to auction houses, and so on. Art insurers understand this and so most art insurance policies allow for this by providing worldwide coverage from the moment it is taken of the nail or hook on the wall until it is affixed to a nail or hook on another wall, including while in transit.
3. Blanket, Scheduled (specified or itemised), or a Combination
Unlike homeowners’ policies that typically have broad limits for anything that arises under the policy, fine art insurance coverage is typically scheduled or itemised, meaning that each piece of work covered under the policy is specifically listed, along with a valuation for each one.
Blanket coverage is often used when someone has many pieces whose individual values might be relatively small, but whose combined value represents a substantial investment. With this coverage items are not separately listed, nor must they be separately appraised. The trade-off is that, regardless of the total amount of the blanket coverage, there is usually a per-item maximum that the policy will pay.
4. Buying Art insurance
When you buy a fine art insurance policy (or any insurance policy, for that matter), your insurance broker will ask a series of questions aimed at determining the value of the art to be insured, as well as the potential for losses (the risk exposure), and any offsetting mitigating factors. Based on that information, the broker will negotiate with insurers with regard the conditions and premium of the cover to be provided.
In determining the risk exposure, insurance companies look at things like the condition of the works, the type of material and storage or display conditions, whether the work is on display, in storage, or is moved around a lot, security measures to protect the art (such as burglar alarm systems), the extent to which it may be exposed to certain types of damage or losses. For example, a collection stored in a belowground facility may be more susceptible to water or flood damage than it would be wind or hail damage. Insurers will also look at the nature of threats that might be made against particular works — artwork that is iconic or whose ownership is widely known may be attractive to would-be thieves or other criminals, while other works may not be easily stolen, but could be vandalized or otherwise harmed.
Insurance companies will also want to see documentation of your ownership, provenance (i.e. record of ownership if the piece has passed several owners), receipt of your purchase, photographs of the work and an appraisal.
An appraisal of your collection is necessary to determine its exact value and to avoid discussions about the value in case it is lost or damaged. That document should include an explanation of how the appraisal was conducted, as well as price comparisons to pieces similar to those in your collection. It can also serve as an inventory of the collection.
Taking out Art Insurance
If you have valuable artwork in your possession, you should consider arranging a special art insurance policy. Because of the unique nature of fine art coverage, standard homeowners’ insurance will not provide adequate cover.
If you have any questions or need help finding the best insurance for you, contact us via InsuranceMarket.sg, chat with us, or call us at 3158 4292.
Chief Broking Officer/ Head of Corporate & Specialty at Insurance Market Pte Ltd
Dick is an experienced insurance professional with specialist knowledge of a broad range of insurance products. At Insurance Market, he is responsible for product development and liaison with insurance companies and provides technical input with regard to the analysis of the various insurance policies on www.insurancemarket.sg.
He also advises and assists our corporate clients and private clients with special insurance needs.