Art collection is not just about acquiring beautiful pieces but also about protecting them for a lifetime. While different types of insurance policies like car, home, and life insurance are quite common, you might not be aware that you can also insure your art collection. Art insurance is a type of insurance that protects you financially if any damage or theft occurs to your precious artwork. In this article, we will help you understand how art insurance works.
What is Art Insurance?
Art insurance is a specialty insurance policy tailored to protect prized art collections of individuals, art galleries, and art dealers. It provides coverage for loss, damage, theft and other perils associated with your valuable art pieces. The policy covers an array of artworks including sculptures, paintings, artifacts, jewelry, and other collectibles that the owner considers art.
How Does Art Insurance Work?
Art insurance policies vary from one insurer to another based on the coverage, restrictions and perils they cover. You need to understand the policy and decide which one suits your interests best by evaluating the cost, breadth of coverage, and the carrier’s claims history.
The coverage will typically depend on the insurer and the art collection involved. The amount of coverage will depend on the perceived value of the artwork, reputation of the artist, and the type of coverage requested. You can choose between two types of art insurance policies: blanket and scheduled.
Blanket Art Insurance Policy:
A blanket policy covers a group of artwork under one total value. It doesn’t itemize each piece of artwork in your collection. However, it limits the insurer’s liability to the total value of the collection, not to one piece individually. It is most suitable for a collection that has numerous lower-priced pieces, and the owner is comfortable with the collective value.
Scheduled Art Insurance Policy:
A scheduled policy provides coverage to each piece of an art collection based on individual values specified in the policy. Each artwork itemized in the policy has a coverage amount that applies exclusively to that item, hence the value of all items often exceeds the collection’s total value. Scheduled coverage is ideal for individuals or collectors with high-priced art items in their collections.
Benefits and Perils Covered by Art Insurance
Art Insurance covers many perils that can potentially damage or destroy your artwork. The most common loss is physical damage due to fire, water or mold. Art Insurance policies may also cover theft, accidental damage, disappearance, and breakage during transportation or installation.
One significant advantage of insuring artwork is that you are adequately compensated should your artwork be lost or damaged despite the impossibilities of finding a replacement for the `real deal`. Art Insurance policies typically allow for several options when reimbursing loss of artwork, including replacement value, actual cash value, and agreed value.
The replacement value of artwork is the cost of purchasing a new piece with the same value as the name piece lost or damaged. Actual cash value insurance pays the cost less depreciation due to age, condition, wear, and tear. Agreed value coverage is when the insurer and the owner of the artwork come to an agreement on the value of the item at the time the policy is in place. This type of coverage is prevalent in policies covering artworks with an undetermined value.
Cost of Art Insurance Policy
The cost of art insurance varies between each insurer and type of coverage one chooses. The most common way that insurers use to calculate the premium for art insurance is based on the total insured value of the artwork. Surprisingly, the cost is lower than many people expect for specific policies based on the value of the collection.
The insurance premiums are typically around 1% of the total insured value of the artwork for blanket policies and 0.5% or less for scheduled policies. In cases where the artwork buyer is financing the acquisition of the artworks from a dealer, some lenders may offer to cover the insurance premium costs as coverage for their investment and safeguard against the risk.
Final Thoughts
Art is not only a valuable investment but also a collector’s pride and joy. The financial and emotional value attached to the artwork makes art insurance an essential element of any collection. Understanding how art insurance works is an excellent starting point to get insured. With the right insurance policy, you can rest assured that your artwork is adequately protected, and you can continue to enjoy your collection with complete peace of mind.