Global Courant
Because the value of fine art and antiques is based on authenticity as well as condition, good documentation is essential. Can you imagine owning an original Picasso worth $2 million, having no documentation, and trying to get that amount from the insurance adjuster after it was stolen?
Another common problem with art and antiques is valuation. Replacing this type of home is usually not even possible. What is the replacement cost of a Picasso? What is the replacement cost of your antique hand-carved table? Even if it can be replaced with a new, identical table, doesn’t its historical value often – sometimes far – exceed the value of a new table?
Because replacement cost coverage simply doesn’t apply to these types of items, most insurance policies now set off these losses at market value at the time of the loss. That’s good news for you. The bad news is that the burden of documenting what you have falls entirely on your shoulders. Yet another difficulty in insuring this type of property is that the value can increase while your coverage remains static, especially if you plan the items. With each passing year, your coverage becomes more and more inadequate.
So, how can you solve the problems of documenting and valuing your fine arts and antiques and still be protected from under-insurance due to inflation? You can choose from two types of insurance: plan or no plan.
Scheduling is the strategy used and recommended exclusively by the insurance industry for insuring this type of property. It requires you to document what you have at the time you insure it through a credible appraisal and, often, a photo. The item will then be scheduled for the appraised amount and an additional premium will be charged.
Here are the benefits of planning your art and antiques:
- The documentation issue is resolved before each claim. Items in the schedule are valued at market value.
- Most insurers – for fine art only – include agreed amount coverage (meaning they will pay you the scheduled amount for theft or total loss with no argument of value).
- You have the option to add broken glass and other breakable objects to the schedule. If breakage is a major concern, planning the item with breakage coverage is the best course of action.
Planning leaves you vulnerable to the inflation problem unless you are willing to take on the time, cost and effort of new appraisals almost every year.
The second insurance strategy I devised for my clients to solve the inflation problem without the hassle and cost of new appraisals. It has three parts and only works if your homeowner’s policy has no dollar limits on paintings, collectibles, and antiques. Very few homeowners policies have a dollar limit on these items, but check yours just in case.
These are the three parts:
- Purchase the optional Special Perils coverage note for your personal property. It increases your homeowner’s total cost by about 10 percent to 15 percent and gives you coverage for accidental loss, with the exception of some exclusions. It covers losses not covered by a homeowner’s basic policy, such as spilled paint on the antique carpet or piano, water damage to your paintings or antiques from a roof leak, and so on. It has very wide coverage – not only for fine arts and antiques, but also for all your other belongings.
- Raise your total homeowner’s limit for Cover C — personal property — high enough to cover all of these valuables and all of your other personal property. Most homeowners policies don’t have enough contents coverage in the event of a total loss to pay for all these treasures and all your other assets.
- Get photos of everything and appraisals of all items where authenticity is essential for a claim settlement. Keep the photos away from home, at work or in a safe. If you do not continue to store this critical documentation outside the company, this strategy will fail you and you will be very disappointed at the time of claiming.
With this method you do not need to have regular appraisals done. When you have a claim and need a current appraisal to document the claim value, take your original appraisals with the photos to a dealer or appraiser. A hidden advantage of this method: the cost of the appraisal is fully paid by the insurance company as damage adjustment costs!
Here are my top insurance recommendations for insuring works of art, collectibles and antiques:
- For high-value pieces (expensive paintings, for example), especially if you can get your appraiser to agree to send you annual value updates, I recommend making an appointment. Fine arts planning allows for much easier settlement of claims, with no arguments about value, unlike no planning, where you have to prove the authenticity and value of what you’ve lost.
- For glassware or other very fragile items, including antique glass, I recommend making an appointment if you want breakage coverage. Don’t forget to add optional breakage coverage to the policy when you schedule.
- For most other treasures, I recommend the three-part plan — but only if you faithfully keep the necessary documentation away from home.
If you have property that is quite valuable and can be stolen, such as jewelry or beautiful paintings, install a central burglar and fire alarm. Installation costs are often $200 or less. The monthly cost of monitoring the alarm is about $30. You reduce the risk of losing an irreplaceable treasure and receive a 10 to 20 percent discount on your homeowner’s bill.
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