A Short Guide to Art Insurance

From insurance on artwork on display to that in transit, here are some life-saving tips to protect your collection.

Imagine Leonardo da Vinci’s iconic Mona Lisa being damaged by a ceramic mug. This may appear to be fantastical, but something like that happened in 2009, when an unnamed Russian woman, who had earlier failed to get French citizenship, decided to vent her anger against bureaucratic red tape by hurling an English-made ceramic mug against the painting. The mug shattered into pieces. Mona Lisa was unharmed. The woman was sent for psychiatric testing.

Art collectors and insurers are full of similar horror stories of sculptures breaking into smithereens, red wine glasses flying across watercolours, and pencil ripping through canvases. For all such unforeseen accidents, insurance for artwork can provide its owner a much-needed safety net by fully or partially reimbursing its cost. Apart from paintings and sculptures, most companies also provide protection to collectables, including rare stamps, carpets, hand-made craft items, miniature cars, and suchlike.

 Here's everything you need to know about insuring your precious art pieces.

 Value Assessment:

 First things first. To get an item insured, you need to get it assessed for value. The valuation is always done by the collector and not by the insuring company. If you are a collector, you need to get the item meant for insurance examined by a professional valuer. Many companies work with a list of empanelled valuers to determine the correct price of a work.

 Risk of Undervaluation:

 There might be a temptation to undervalue a piece to settle for a lower premium amount. Resist it. Brokers are full of stories of how owners who undervalued their art pieces were left in a lurch when those got accidentally damaged. In an interview with Terrain.art, a broker who works for one of the best art insurance companies in India, narrated a story in which a collector insured an INR 4-crore painting for half of the price. During a heated exchange at a party, one of his guests damaged the painting. While the collector got the price of restoration and the depreciation cost of the insured work, both were calculated on the sum insured, which was significantly lower than the actual value of the insured piece.

 Value Appraisal:

 Since art is a commodity, its value depreciates or appreciates as time moves on. As such, the best practice would be to undertake an annual appraisal of the value of a painting or a sculpture. Bear in mind that the insurer would not insist on this. Any increase in the value would result in a simultaneous increase in the premium amount of the insurance for artwork.

 Private Collection versus Gallery:

 Insurance for a private collection differs from that for a gallery. For example, if a piece belongs to a private collection, then the owner would get the full value of the work if it is completely destroyed. On the other hand, he would get the cost of restoration and depreciation value if there’s a partial loss.

 Insurance for Artwork on Display:

 Things work a bit differently for a gallery setup. If a piece on display gets damaged before it is sold, then the gallery gets what is called consignment value – the value of the liability that the gallery owes to the owner.

 Insurance for Artwork in Transit:

 There’s also something called insurance in transit. This covers any damage that is incurred by an exhibit that is lent to a museum or an exhibition by a gallery.

 Risk Profile:

 While extending a cover, the company assesses the risk profile of the owner. Here too, you enjoy a distinct advantage as a private collector over a gallery. The risk profile of a gallery is distinctly higher than that of a private collector. In a gallery, there’s a lot of movement that makes exhibits vulnerable to damage. On the other hand, with a private collector, the chances of damage are significantly lower. As such, you can save up a lot of money on the premium amount.

 Transfer of Ownership:

 Finally, you should also be aware of the transfer of ownership. If the owner is different from the financier of a painting or a sculpture, then who gets the reimbursement for damages should clearly be mentioned in the policy document. However, if the owner is the same as the financier, then the question of transfer of ownership does not arise.

At Terrain.art, you get a list of the best art insurance companies in India, which provide collectors and galleries with a range of products to ensure the safety of the artwork and precious collectables.