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It May Be Art, But Is It Covered?

Many people collect paintings, sculptures, antiques, and other works of art with values ranging from garage sale prices to thousands of dollars. The International Risk Management Institute states that art becomes valuable for one of three reasons: cultural significance; owner’s subjective value; or the marketplace’s estimate of its worth. Regardless of the reason, damage to a valuable work of art will likely cause the owner significant financial loss.

A standard homeowner’s insurance policy provides some coverage for fine art, but is unsuitable for high-priced works. The insurance company will pay for losses to art caused by fire, water damage, vandalism, theft, and a limited number of other causes. In the event of a loss, the company will pay the item’s replacement cost after subtracting depreciation. For example, if fire destroyed a painting worth $1,000 on the open market, the homeowner’s policy would pay the cost of replacing the canvas, paint and frame after subtracting some amount to reflect the age of those materials. This amount may be nowhere close to the work’s market value.

For this reason, art owners may want to buy separate insurance on their fine arts. This insurance can be in the form of an addition (also called an endorsement) to the homeowner’s policy, or via a separate policy (sometimes called a “fine arts floater”). A fine arts floater insures paintings and drawings; art glass windows; valuable rugs, statues, furniture, and books; and “other bona fide works of rarity, historical value or artistic merit.” These items must be in a private collection owned by the policyholder; there is no coverage for works owned by a museum, business or government agency. The policy lists high-value art works individually on the policy with their associated coverage amounts and shows a combined insurance limit for all lower-value pieces. If the policyholder buys a new piece during the policy period, the policy provides automatic coverage for 90 days. The most it will pay for a new piece (until the owner reports it to the company) is 25 percent of the amount of insurance covering items specifically listed on the policy.

If the owner plans to transport an artwork from the address shown on the policy, coverage will apply only if competent packers handle the move. Coverage does not apply to a piece while it is in the custody of an art dealer, museum or auction house if the entity has insurance covering it. Also, the policy will not pay for damage to pieces while they’re on exhibition off the owner’s premises; the owner can extend coverage off-premises by adding the address of the exhibition to the policy.

The policy covers damage to fine arts from all causes except:

  • Actions of governmental or civil authorities;
  • Intentional damage;
  • Neglect;
  • Repair, restoration, or retouching processes; and
  • Breakage of glass, statues, and other fragile articles unless fire, explosion, collision, windstorm, earthquake, flood, malicious mischief, or theft caused the loss. For an additional premium, the company may remove this limitation.

In the event of a loss, the company will pay the amount shown on the policy for items specifically listed on the policy. For other pieces, it will pay amounts equal to their replacement cost minus depreciation, up to a maximum of $500 per item.

To accurately determine an item’s value, the insurance company may require an expert appraisal. It may also require the policyholder to take certain precautions to safeguard especially valuable pieces. A qualified insurance agent can give advice on appropriate coverage and companies. Anyone who owns these treasures should make certain the right insurance is in place.