Protect Your Art
June 9, 2017 | BY Philippine Tatler
Learn about the essentials of art insurance, straight from an expert
People call this era of art as the new renaissance, with contemporary artists thriving and new media expanding the horizons for expressionism. Whether you collect art for the appreciation of the artist’s message or for purposes of investment, you’d want to protect your collection from the risks associated with owning them.
We had a chance to catch up with Mr. Mandy Velasquez of Malayan Insurance to find out what every art collector should know when getting their art insurance:
Philippine Tatler: What are the typical risks associated with owning art that need to be insured?
Mandy Velasquez: While collecting art is an exciting and fulfilling experience, it is not without risks. The usual exposure would be against fire, water damage, theft, and natural perils such as typhoon, flood and earthquake. In recent years, forgery has also been a main concern for art collectors.
PT: What is the range of value of the art piece that makes it necessary to be insured?
MV: There’s actually no range or minimum value required – it’s always a must for any prudent collector to have his/her art collection insured, just like any type of property that he/she owns. Whether he/she collects art merely as a hobby or as a form of investment, the collection must be protected by insurance regardless of its size.
PT: In art insurance, there are supposedly two kinds, specifically Title Insurance and Property Insurance. Is it practical to have one or both types of coverage?
MV: We strongly recommend that Property Insurance be obtained to protect the art collection against the aforementioned risks, among others.
However, if the collector is already comfortable with the authenticity and provenance of the pieces in his/her collection, he/she may opt to do away with Title Insurance and thus save on insurance premium costs.
PT: Is art insurance considered redundant if you have home insurance? Would it be considered as a double insurance?
MV: It depends on the type of perils being covered. Home Insurance policies usually cover ‘named perils’ only, i.e. the cause of loss must be one of those listed in the policy before the collector can claim from the insurance.
On the other hand, Art Insurance policies typically afford cover on ‘all risks’ basis, i.e. the collector need only show that a loss occurred and provided that the cause is not in the listed exclusions, the policy will respond. Moreover, Home Insurance policies usually exclude cover for art pieces, or in case they do, only cover against named perils. Hence, it would be best for the collector to remove the art pieces from his/her Home Insurance policy and take out a separate Art Insurance policy for them.
PT: What are the essential requirements to have the art covered by insurance?
MV: The first thing the collector must do is to make an inventory of the art pieces that he/she wants to be insured. The list must contain the name of the artist, the title of the work, the year it was made, the medium of the work, and the declared value. Certificates of appraisal and authenticity or provenance may be requested by the insurer (particularly for high valued pieces), so these must also be prepared.
The collector will be asked to fill up an insurance application form to secure pertinent information for the underwriter’s evaluation, and if so required, a risk survey of the collector’s premises will be conducted.
PT: What are the standard risks that can be covered by art insurance? Can I insure my art for depreciation in case of minor damage to the art?
MV: The beauty of Art Insurance is that it provides a more comprehensive cover for the art than the conventional Home Insurance. The cover works on an ‘all risks’ basis, i.e. any form of accidental physical loss or damage to the art, including the typical risks earlier mentioned. For instance, Art Insurance can cover damage due to a visitor who accidentally slips and causes a mounted sculpture to fall, or due to a ball being tossed by children that all of a sudden lands on painting. These two incidents would not be covered under Home Insurance. Aside from these risks, Art Insurance can also cover extremes of temperature and humidity if required by the collector.
Moreover, Art Insurance provides “wall to wall” cover to the art pieces, i.e. both while on display or exhibition and while in transit or being moved from one location to another. Whenever a certain piece will be borrowed by a curator for exhibition at a gallery or museum, the collector can rest assured that the loaned piece will be covered from the time it is removed from his premises, while being packed, transported, stored, exhibited, until it is returned.
One unique feature of Art Insurance is that it will pay for depreciation in value of an art piece after loss or damage, on top of the restoration costs. In case of an accident, Art Insurance policy will take care of the costs to restore the damaged art piece (up to its declared value) and upon re-appraisal, will also pay for any resulting depreciation in value.
PT: How are the premiums determined for a particular piece of art? Is the art appraised independently by a third party to determine market value or will it be based on purchase price?
MV: The underwriter will evaluate the collection as a whole but will also look at the composition and profile of the individual art pieces. Some risk factors to be considered are the location and construction of the collector’s premises, the security arrangements, the availability of fire fighting equipment, and the collector’s previous loss experience, if any.
The collector will be asked to declare the value of each piece of art that he/she wants to be insured, either using the purchase price or the current market value as provided by an independent third party.
PT: What are the important clauses in an insurance coverage that a collector must distinctly know about before getting their insurance coverage?
MV: The collector must check what type of cover is being afforded, i.e. ‘all risks’ or ‘named perils’ and pay particular attention to the listed exclusions. He/She must also check whether transit and outside exhibition risks are covered. In addition, the basis of valuation and loss settlement must be reviewed. While the underwriter will tailor the coverage according to the collector’s requirements, he/she must conduct his/her own due diligence and must ensure that his/her needs are met before having the policy issued.
Mr. Mandy Velasquez is the Head of Marine and Aviation Underwriting, including Fine Arts, Jewellers Block, and Stock Throughput for Malayan Insurance. To know more about Malayan Insurance Art Insurance, visit http://www.malayan.com/products/special/fine-arts-insurance.
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