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Insuring warhol: agents and brokers should work with insurers to educate clients on how to protect their investments in fine art.


An art collection can be the product of a sincere passion or simply a tool to diversify one's portfolio. Either way, it is likely that the collector may not fully understand the range of exposures that can damage these assets. Agents and brokers can work together with insurers to educate clients on ways to help protect their cherished investments.

Sunlight alone can cause considerable damage to a painting. Humidity can cause paint to crack off a canvas. Household employees can snatch artwork while clients are away or simply damage the painting with household cleaners. These and many more common exposures can cause a considerable, if not a total, loss to a client's artwork.

Whether your client owns a Dutch masterpiece or installation art by newly emerging artists, the value of their artwork, both financial and personal, can be undermined by poor loss-control techniques, inaccurate or untimely appraisals and insufficient insurance coverage.

Some key loss prevention tips that agents and brokers can share with clients include:

* Keep paintings out of direct sunlight.

* Never hang artwork above a fireplace.

* Install centrally monitored fire and burglary systems and water-leak prevention systems.

* Do not store fine art in basements or attics.

* Hire a professional art installer to hang the artwork.

* Frame all paintings using museum-quality materials.

Some insurers also employ loss control specialists who can tour clients' homes and make specific risk mitigation suggestions.

Aside from physical exposures, the appreciation of artwork can create large coverage gaps and expose clients to significant financial losses. For example, a $200,000 painting purchased 10 years ago could easily have appreciated by 25%. If the coverage limits remain the same over this period and the client experiences a total covered loss, the client could be out-of-pocket by $50,000. To prevent such a coverage gap, agents and brokers should advise their clients to have their collections appraised by professional appraisers every three to five years and adjust their coverage limits accordingly.

In addition to periodic appraisals, appropriate insurance products are a valuable part of an overall risk management program. Some clients may simply assume their artwork is covered under their homeowners insurance policies, but in reality, most of these policies provide limited coverage for fine arts. Agents and brokers can tap carriers for specific loss scenarios that can demonstrate the value of fine-arts policies.

Some important policy features that agents and brokers can advise their clients to consider include coverage for appreciation and newly purchased items. When an item has appreciated above its coverage limits, some fine-arts policies can provide coverage for up to 150% of the item's coverage limits. Agents and brokers can also highlight policies that provide coverage for newly acquired items that are not yet insured.

By helping clients build a risk management program to help protect their artwork, agents and brokers are providing a valuable service that will help boost clients' trust in their expertise. Agents and brokers also will strengthen their customer relationships by reducing the likelihood that losses will occur. The agent or broker who helps to protect an art collection shows he understand his customer's passion.

Scott Spencer, a Best's Review columnist, is senior vice president, Chubb & Son, and worldwide appraisal manager, Chubb Personal Insurance, Whitehouse Station, N.J. He can be reached at
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Title Annotation:Property/Casualty: Loss/Risk Management Insight
Author:Spencer, Scott
Publication:Best's Review
Date:Nov 1, 2007
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