Insurance Coverage

Most Insurance companies will require an appraisal for items valued over $5000.00, but some as low as $2000.00 and others more accustomed to fine art coverage, only require an appraisal on items over $50,000.00.  Check with your insurance carrier. 

Proper insurance coverage of your fine art depends on a professionally prepared appraisal report. In the event of loss or damage, your insurance company will require proof that the item existed and the value of that item at the time of loss. Appraisal reports are a key component in documenting and protecting your fine art investment.

A competent report will catalogue and record all details of the artwork including its provenance and condition. The appraiser will also research the market value of the item and archive the comparable sales in the client file which will be retained by the appraiser for a minimum of five years.

FYI: Choosing Fine Art Coverage 

In considering how much coverage to purchase, you have the option to choose between two very different options:

  1. Agree to a predetermined reimbursement amount that is determined by a qualified, professional appraiser. This amount does not change even if the market for the piece rises or falls.
  2. Agree to be reimbursed for the current market value of the artwork at the time of loss.

Many collectors choose the first option, known as the “agreed value,” which is a set amount paid in the event of a total loss. For example, if a fire destroys the Matisse you insured for $10 million, then $10 million is what you will receive as a claim payment. This can be a advantageous if the market value of that Matisse has declined to say $8 million. The policy and the prior appraised value protects you.  However, it could be disheartening, if the painting’s value has appreciated to $20 million during the same period.

Choosing option two, insuring for "current market value", is one way to protect against financial loss due to market volatility. However, these policies can have their drawbacks. In the event of a claim, determining the market value can require hiring not just an appraiser and other experts, but a lawyer may also be necessary to compel the insurer to pay. The process may be drawn out over many months if the insurer contests a valuation. And, while you may benefit if work’s value has increased, the collector can be hurt if the market has weakened for his or her piece, the artist, or a specific style.

As a compromise, one can select an agreed-value policy, then seek to capture increases in market value by periodically updating the appraisal. This is known as scheduling. A qualified art appraiser can work with you to periodically review your collection and advise on valuation adjustments when warranted.

For example, collectors of 17th Century paintings where prices are relatively stable, might update an existing appraisal document every five years. However, with Contemporary Art, where there is significant volatility in the market, you might be well advised to request the appraiser to update the report every one or two years.