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Sure, serious collectors buy art insurance, but all art owners are probably better off having policies, even if their holdings are small. How small? "I would say there is almost no minimum and no maximum to what one should consider insuring when it comes to fine art and collectibles," says Christiane Fischer, CEO of AXA Art Insurance Corp. Many collectors, however, may want to set the floor at $50,000 or $100,000.

For combined holdings valued in the low four figures, a regular homeowners or renters policy likely provides adequate protection. Specialized art insurance, however, has advantages, such as no deductibles (in many cases), coverage of recent purchases and few exclusions. Typically, according to Joseph C. Dunn, CEO of Huntington T. Block Insurance Agency, only losses due to war, nuclear disaster, wear and tear or vermin are excluded.

Two types of art insurance exist: Property/casualty policies — offered, for example, by AXA, Chubb and Chartis (an AIG spin-off) — cover theft and many kinds of damage. Title insurance, created in 2006 by ARIS (the sole provider), protects against someone having a claim to a piece you bought.

Why wouldn’t people insure their treasures? Beyond the cost involved, many are reluctant to create a paper trail that could be inconvenient if they wanted, say, to hide the profit from selling a painting from the irs or to escape estate tax by keeping a piece out of a list of the deceased’s holdings. But such tactics are nearly impossible today, when most transactions are computerized. Also, given the increasing number of restitution claims, any rational buyer would want documentation from the seller.

How to buy art insurance
If you have an insurance broker you like, you might start there, but only if the agent is either willing to deal with specialized insurers or knowledgeable about art. "You don’t want to say the name of an artist and have the broker go, ‘Huh?’," says the art adviser Abigail Asher, of Guggenheim, Asher Associates in New York. Alternatively, you can go straight to the source: For a list of recommended art insurers, visit artinfo.com/artinsurance.

How much coverage do I need?
Typically, you buy insurance based on appraised value. In the event of a claim, some policies reimburse for that amount; others pay the greater of the appraised value and the market price, sometimes capping reimbursement at 150 percent of the former. Insurers expect clients to appraise their works every three to five years in normal markets, more often if prices are volatile, according to Dorit Straus, worldwide fine art manager at Chubb. Despite their expense, frequent appraisals can benefit policyholders as well, ensuring, in a rising market, that they’re covered for any appreciation and, in a falling one, that they aren’t paying for unneeded coverage.

Insurance companies, unsurprisingly, suggest insuring 100 percent of artworks’ appraised value. The owners may disagree. Since most claims involve damage from moving artworks, those who don’t lend or transport their pieces frequently might decide to buy coverage for some fraction of the appraisal. So might someone with a $100 million collection divided among three homes in three different states. On the reasonable assumption that disaster is unlikely to strike in all three places, this person might buy just $40 million of coverage, thus taking on some risk while still transferring most of it to the insurance company.

How much will it cost?
Title insurance runs from 1.5 to 4 percent of the appraised value of a purchase, a onetime expense that protects you and your heirs. It usually covers legal defense costs. Some categories are excluded — ARIS president Judith Pearson names antiquities and cultural artifacts, citing their complex title laws.

The typical yearly property/casualty premium is $700 to $1,000 per $1 million of appraised value, if there are no special considerations, and up to twice that if there are. (To reduce the premium, offer to accept a deductible.) Insurers’ main criterion is location. In the U.S. the riskiest spots are California, Florida and New York City. The key concerns in the first two are earthquakes and hurricanes; in the third, the concentration of collectors in certain neighborhoods.

Specialist insurers try to minimize threats to artworks by recommending that they be kept away from windows and out of direct sunlight, says Bali Miller, a New York-based adviser. Not following such common-sense advice might result in higher premiums or deductibles or being denied coverage altogether.

"Art Insurance" originally appeared in the September 2009 issue of Art+Auction. For a complete list of articles from this issue available on ARTINFO, see Art+Auction's September 2009 Table of Contents.