Why Insuring Your Art Collection Is Crucial
November 8, 2017 | BY Richard Lord
Like any other valuable asset, your art should be insured. Here's why, and how, you can protect your collection
There’s a lot of uninsured art out there. This is unwise: art collections are often expensive and can fall prey to everything from theft to fire, flood and other acts of God, to accidental damage, especially during sensitive operations such as moving works or restoring them.
What are your options?
Art insurance—also potentially covering antiques and collections—is available from many sources in Hong Kong, and fortunately, it’s easy to arrange comprehensive cover. Smaller collections, in fact, can often be covered under home policies.
“There are a number of really good options for home insurance policies which include specialist collections coverage—and merging the two covers can make life much easier from an administration perspective,” says Michael Lamb, marketing director of Hong Kong insurance broker CCW Global.
When to start thinking about art insurance
Usually, in Hong Kong, anything worth less than HK$10,000 will automatically be covered under a home policy; items worth more than that will need to be specified in order to make sure you have sufficient coverage. A separate art insurance policy, however, becomes a good idea for collections above a certain value. Home insurance policies often set the limit for specified items at about HK$200,000, making that a typical starting point; but some collections fall between the cracks, says Lamb.
“One of the big reasons for not having coverage is the perceived complexity of the products—especially with regards to collections of over HK$200,000 but below $2,000,000, which tend to be in a fairly awkward area for cost/cover considerations.”
Here's what's covered
Policies generally cover both the replacement of an item if it’s lost or destroyed and its restoration if it’s damaged. That also extends to any reduction in its value in the event of damage.
“For specified items, a total loss would normally mean that the policyholder is paid the full sum insured for the item,” says Lamb. “A partial loss of a specified would normally see a restoration claim implemented. For non-specified items the insurer will normally pay for the costs of replacement or restoration, depending on which is lower.”
Covering all bases
Collectors who own pieces of which the provenance and ownership history are unclear should also think about title insurance. It means you’re covered in case the piece was previously unlawfully acquired and someone else has a claim to it.
“If you are buying, for example, an artwork directly from a dealer at an event like the Asian Contemporary Art Show, then there probably isn’t a great deal of concern with regards to a defective title—the provenance of the piece is unquestioned,” says Lamb. “If, however, if you are dealing with artworks created before 1931 and which were historically domiciled in Europe, then looking for a title clause on a collections policy could be extremely worthwhile.”
Art can fluctuate dramatically in value, so any insured collection needs to be regularly appraised—once a year is a good idea—and the level of coverage adjusted accordingly. And just in case the worst does happen, make sure you have the right documentation: it’s incredibly important in proving loss. An original sales receipt is, of course, the best proof of all. If that’s unavailable, for instance in the case of a family heirloom, an official valuation is the next best thing.
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