How to insure art

Those who remain unconvinced of the importance of art insurance should consider the following figures. A total of $6 billion worth of art and cultural property crime are recorded each year, according to the FBI’s art crime squad, at time of print. Closer to home, 11 paintings worth $387,000 were stolen from a gallery in Toronto in July 2011 alone. And then there are unaccounted losses worth millions of dollars due to damage or destruction by fire, flood and other reflections of the wrath of mother nature.

Sandra Henderson, senior vice president, eastern Ontario at BMO offers another piece of critical art insurance advice: do not underinsure your art. “That is one of the biggest disappointments [and] people need to understand that it’s not your general insurance company that specializes in this area.”

Insurance is a key component of investing in art, says Toronto-based Ann-Louise Seago, global fine art & specie insurance executive.

Accidental damage to a piece of fine art could render it worthless or considerably reduce its market value. “Art and collectibles are an investment and what insurance coverage does is it helps reduce or negate any financial loss to the owner if the piece is damaged or destroyed,” says Seago. “The other reason people insure is [to preserve the] sentimental value and cultural heritage they represent.”

Art insurance generally covers the risk of damage during transit, restoration and framing. Typically, it includes all risk of physical loss or damage as a result of fire, flood, theft and natural disasters. Some, however, exclude damage due to acts of wars, nuclear hazard, or due to the fault of an art conserver while at work.

The payout mainly depends on the type of policy coverage purchased. The level of coverage can range from the agreed value at the time of purchase, to the current market value, which takes into account appreciation in value over time.

Make sure you understand your insurance policy. This means reading the fine print, and asking every question about every conceivable loss or damage situation you can imagine.

“What we recommend is that people get a dedicated fine arts insurance policy,” says New York-based Suzanne Gyorgy, head of art advisory and finance, Citi Private Bank. “Too often people have it on their home owner’s policy [which is inadequate]; a dedicated fine arts policy will really spell out the coverage, list the individual pieces, and give you a much more comprehensive focus in terms of policy for your art collection.”

There’s no excuse for not insuring an art collection. If you can afford to buy art, you can afford to buy the insurance, goes the argument.

“It’s not terribly expensive and fine art insurance, for what you’re getting, is really not prohibitive at all,” says Gyorgy.