Intricacies in art insurance
There are 2 types of art insurance - ‘Title’ and ‘Property’. Title insurance offers coverage against a defective title and is a one-time expense. Title insurance is bought for valuable artwork, owned by many individuals and sometimes the artwork’s history is somewhat unclear. It is normally bought by art collectors, gallery owners and those who acquire substantial number of artwork. In the event of any defective title, the owners of the artwork get compensated by the insurance company.
Property insurance provides compensation if the insured artwork or collection is damaged, lost or stolen. Insurance companies offering Property insurance pay compensation depending on the situations and the circumstances leading to damage, loss or theft.
In normal circumstances, Title insurance policies cover 1% to 7% of the total estimated value of the work of art. This is so because in the cases of older pieces of art, it is difficult to track back to when the piece might have been in the artist’s studio. If there is no solid transaction record available for the piece, chances are that the insured will be paying more for Title insurance as it is deemed a higher risk.
Some of the factors that can be a deciding factor on the quantum of premium in art insurance are:
◆ Valuation of the work of art
◆ Chances of moving or lending the work of art
◆ Location of the work of art
◆ Conditions of storage of the work of art
◆ Status of the security systems at the location of the work of art
◆ The current condition of the work of art
◆ The level of restoration that would be required
In general terms, a person may be paying 1% 2% of the value of the work of art by way of premium.
Art insurance will cover damage or loss incurred on account of fire, theft, vandalism accidents etc and most policies also cover loss of income if the work of art is damaged or destroyed. There are also policies that cover forgery, which is when someone creates a fake work of art and tries to pass it off as the real. Insurance experts recommend that a person owning a work of art should opt for insurance in case the work of art is concerned is difficult or impossible to replace if it were damaged or destroyed.