Insuring luxury items

Few people would buy a house without insuring it and you can’t even legally drive your car without coverage, yet it’s not uncommon to see valuable art collections left financially unprotected.

Big mistake, experts say, not least because those fabulous paintings and sculptures you’re so proud of might even be worth more than your other valuables combined.

Dorit Straus, worldwide fine art insurance manager at Chubb, says often the biggest thing which catches art owners off-guard is realizing just how much their collections are worth. “I think if today many collectors did discuss their collections with an appraiser, they would realize their art assets exceed their other types of assets. For the cost of pennies per $100 you are protecting assets in the millions,” Straus said.

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While people often think theft is the biggest risk to their art, Straus says the major causes of loss tend to be more mundane things like fire, water damage and bumps and bruises from being handled.

Make a Luxury List

The key to knowing when and how to insure your art is to make a list of your items, find an independent insurance broker and start with an appraisal. A skilled appraiser will not only confirm the value of any art you may have but also help you prioritize what needs coverage first—your framed Picasso sketch might be far smaller in stature than the two-metre tall cast-iron sculpture in your foyer but its value—and chance of being damaged—might be much bigger.

…a homeowner’s policy is not the appropriate place to cover art because home insurance tends to have limits on high-value items so you are unlikely to receive even close to the value of your artwork in the event of a loss.

Kevin Solomon, an insurance advisor with Leipsic Private Risk Managements in Winnipeg, Manitoba says experienced art insurers can give you valuable advice on all the physical aspects of art ownership like storage, transport and caretaking while also understanding your financial needs.

“Specialty art insurers help with risk management and wealth preservation. They know about protection, they have warehouses to store art. As client-facing advisors, we get support from the insurers,” Solomon said.

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Insurers will often conduct a basic vulnerability assessment to help in determining your policy rates. Art which hangs on a wall in a high-security condo that is your primary residence is likely to be much safer, and therefore cheaper to protect, than a similar piece stored in a damp basement of a summer house located 20 minutes from the nearest fire station.

If you have region-specific art, make sure to get it appraised by experts who specialize in that region. “It’s important to have the valuation done by regional experts because the local marketplace determines demand and value. Group of Seven paintings, for example, will tend to be valued more appropriately by Canadian appraisers,” Straus said.

Types of Luxury Policies

If you have art of significant value, a homeowner’s policy is not the appropriate place to cover it because home insurance tends to have limits on high-value items so you are unlikely to receive even close to the value of your artwork in the event of a loss.

Katja Zigerlig, vice-president of art, wine and jewelry insurance for North America at Chartis says home policies typically only cover contents up to 50%-70% of the home’s value and are intended for basic contents—not the $50,000 ceramic vase in your living room. She suggets separate fine art insurance and for that you’ll have to pick a scheduled or blanket policy.

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A scheduled policy involves documenting every item you wish to cover and its value then adding the total up to create your policy. This policy is ideal for any collection that has items of significant value you wish to cover individually and you can tweak your coverage accordingly.

With a blanket policy, you pick how much coverage you want and then simply claim items as they get damaged or lost with no itemizing needed like for a scheduled policy. But the onus is on you to prove you had the item in the condition you are claiming and most blanket policies have limits on the maximum value per item you can claim (Zigerlig says the average Chartis blanket policy has a $20,000 per-item limit). Blanket policies work for collections which include lots of items with modest value, like vintage movie posters valued $300-$800 each, for example.

The bottom line is this: if you have art that is worth serious money, do a little extra homework and go with a scheduled list because it will mean easier payouts, better coverage and less stress in the event of loss or damage.

Be vigilant and get regular re-appraisals on your collection every two to five years because if the value has gone up, your existing coverage likely won’t be enough.

“If you own a Warhol, a Picasso or a Group of Seven, the prices have significantly gone up in recent years so you really should get them re-appraised,” Zigerlig said.

Make sure your policy includes a “newly-acquired” clause which will instantly transfer coverage to any new piece of art you buy for 30-90 days until you can have it officially added to your policy; these clauses typically cover up to a percentage value of your entire policy.

Most importantly, remember that art insurance is as much about trust as anything else that involves your valuables and like many things in life, you get what you pay for. A cheaper policy might not be worth it if your provider skimps on payouts or regularly challenges you on claims.

“As an insurance provider, we’re selling a promise to pay. A lot of claims in the art world are a grey area, for various reasons. Our philosophy is if it’s grey, we pay. You want a good company that is fair and equitable and provides good service, even if that costs a little more,” Straus said.

Zigerlig puts it another way. “Art is kind of like a baby—you love it a lot but it doesn’t come with instructions. You track what’s happening in your bank account, why wouldn’t you put the same attention into the financial assets you have hanging on your walls?” Raf Brusilow and Brent Pidborochynski is a freelancer based in Toronto. With notes from Sheila Avari This article was originally published on capitalmagazine.ca.