Covering Artwork and Antiques

Because the value of fine art and antiques is based both on authenticity and 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’s stolen?

Another problem common to fine art and antiques is valuation. Replacing this type of property usually isn’t even possible. What is the replacement cost of a Picasso? What’s 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 exceed – sometimes far exceed – the value of a new table?

Because replacement cost coverage just doesn’t apply to these types of items, most insurance policies now settle these losses for the 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 with insuring this kind of property is that the value can increase while your coverage remains static, especially if you schedule 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 against under-insurance due to inflation? You can choose between two methods of insurance: scheduling or not scheduling.

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 by providing a credible appraisal and, often, a photograph. The item is then scheduled for the appraised amount and an extra premium is charged.

Here are the advantages of scheduling your fine art and antiques:

• The documentation problem is solved in advance of any claim. Items in the schedule are valued at their market value.
• Most insurers – for fine art only – include agreed amount coverage (meaning, they pay you the scheduled amount for a theft or total loss with no value argument).
• You have the option to add breakage of glass and other fragile items to the schedule. If breakage is a big concern, scheduling the item with breakage coverage is the best course of action.

Scheduling leaves you vulnerable to the inflation problem, unless you’re willing to incur the time, expense, and hassle of new appraisals almost every year.

The second insurance strategy is one I devised for my clients in order to solve the inflation problem without the hassle and expense of new appraisals. It has three parts and works only if your homeowner’s policy has no dollar limits on paintings, collectibles, and antiques. Very few homeowner’s policies have a dollar limit on these items, but be sure to check yours just in case.

Here are the three parts:

• Buy the optional special perils coverage endorsement for your personal property. It raises your total homeowner’s cost about 10 percent to 15 percent and gives you coverage for any accidental loss, except for a few exclusions. It covers losses not covered by a basic homeowner’s policy, like paint spills on the antique rug or piano, water damage to your paintings or antiques from a roof leak, and so on. It has very broad coverages – not only on fine arts and antiques, but for all your other belongings as well.
• Increase your total homeowner’s limit for Coverage C – personal property – high enough to cover all these valuables as well as all your other personal property. Most homeowner’s policies, in a total loss, don’t have enough contents coverage to pay for all these treasures and all your other belongings.
• Get photos of everything and appraisals on all items where authenticity is vital to a claim settlement. Store the photos away from home, at work or in a safe-deposit box. If you don’t follow through on storing this critical documentation off-premises, this strategy will fail you and you’ll be extremely disappointed at claim time.

With this method, you don’t need to get regular appraisals. When you do have a claim and need a current appraisal to document the claim value, you bring your original appraisals with the photos to a dealer or appraiser. A hidden benefit of this method: The cost of the valuation is completely paid for by the insurance company as a claims-adjusting expense!

Here are my bottom-line insurance recommendations for insuring artwork, collectibles, and antiques:

• For high-end pieces (for example, expensive paintings), especially if you can get your appraiser to agree to send you annual value updates, I recommend scheduling. Scheduling fine arts makes for a far easier claim settlement, with no arguments about value, as opposed to not scheduling, where you must prove the authenticity and value of what you lost.
• For glassware or other highly-fragile items, including antique glass, I recommend scheduling if you want breakage coverage. Remember 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 any kind of property that’s quite valuable and could be stolen, like jewelry or fine paintings, install a central burglar-and-fire alarm. Installation costs are often $200 or less. The monthly cost to monitor the alarm is about $30. You reduce the risk of losing an irreplaceable treasure, and you receive 10 percent to 20 percent off your homeowner’s bill.