By: Blair Wunderlich, Fine Art Insurance Specialist at Huntington T. Block Insurance Agency, Inc., a division of Aon
If you are thinking about investing in an art collection for the first time, there are many things to consider before getting started. For example, you should consider the genre of art you want to collect, the artists you prefer and the interesting galleries you want to follow. But what shouldn’t be overlooked is the insurance you should have in place to protect your new collection.
Here are five questions emerging collectors need to ask:
1. Who should I be consulting prior to purchasing a new piece of art?
If you are serious about collecting, you will want to consult with industry professionals prior to acquiring: a knowledgeable conservator, an art advisor and an insurance broker. A conservator can tell you if the piece is in good condition and if not, what kind of restoration will be needed to maintain the piece. An experienced art advisor can help you research the provenance and generally negotiate sales terms. Lastly, an insurance broker can guide you on what type of policy to purchase.
2. When does insurance kick in and who is responsible for transit?
Many new collectors believe when they purchase a piece of art, the gallery will cover the piece in transit until it arrives at the collector’s home. Often this is not the case. As soon as you buy a piece, and have documentation of purchase, call your insurance broker to get a new fine art policy. Review the sales agreement with your insurance broker to see if the gallery is responsible for insuring the item in transit or if you are liable. Similarly, a common assumption is that coverage is afforded under your homeowners insurance. Typically, these policies have a strict sublimit on collectibles, exclude flood and mysterious disappearance so it’s advisable to always purchase a separate fine art policy to cover your collectibles.
3. What should my policy cover?
When obtaining a fine art insurance policy, it is important to review a policy’s exclusions. Two common examples: natural disasters and additional locations. New collectors should make sure their policy covers natural disasters and effects of extreme weather, i.e. floods and hurricanes, humidity and extreme temperatures. Many times, damage due to natural disasters is excluded—for example, in California, confirm Earthquake and mudslide coverage and verify if there is a special deductible. In Florida, confirm that flood and wind coverage are included and review the deductible. Be aware of any risks specific to their geography and to prepare for them accordingly.
Similarly, when it comes to moving your collection to a different location, such as to a framer, conservator, or a second home, the collector should verify that coverage extends to transit and other locations. Be sure to alert your broker and be sure other locations, particularly long-term stays such as storage, are added to the policy.
4. What should collectors consider when buying art online? Or buying a piece of art made of unusual materials?
Although convenient, buying art online could be tricky. Shop smartly by requesting condition reports and supplemental photos of the piece. In addition, if you’re considering buying a piece of art made of an unusual medium, it’s important to understand the challenges the materials may pose in the future and how insurance may respond. For example, if you buy a piece made of faded newspaper, this may be aesthetically pleasing now but imagine if the paper continues to fade— many insurance policies exclude wear and tear, gradual deterioration and inherent vice. Thus, any claims related to the foregoing will be excluded.
5. What is a valuation clause and why is it important?
A valuation clause is the amount that has been agreed upon by the insurer and collector in the event of a loss. For art, the valuation clause can be based on the purchase price of the artwork or based on the current market value. It is important to understand these nuances-- just like each piece of art is unique, so is the valuation clause. As a new collector, you should work with your broker on determining the right kind of valuation clause you want to have in place. This conversation can take place when you’re first putting together your policy as well as when renewing your policy.
Starting an art collection is an exciting moment and warrants careful preparation to safeguard your investment. By thinking through all possible outcomes and having fine art coverage in place, your art collection will better stand the test of time and life!
Blair Wunderlich is a Fine Art Specialist at Huntington T. Block Insurance Agency, Inc., a division of Aon, the world’s premier insurance broker. With more than 1,200 museums, 800 art galleries, and some of the largest universities and Fortune 500 companies’ art collections insured, HTB is the world’s leading provider of insurance to the fine art community.
This article is provided for general informational purposes only and is not intended to provide individualized business, insurance or legal advice. You should discuss your individual circumstances thoroughly with your legal and other advisors before taking any action with regard to the subject matter of this article. Only the relevant insurance policy provides actual terms, coverages, amounts, conditions, and exclusions for an insured.
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