Salient features of art insurance

Question: As an art lover and, to my mind, a novice collector, I always enjoy the hustle and bustle of Art Dubai. This year was particularly fruitful and I ended up breaking the bank to make several high-value purchases. While I began collecting as a hobby, the overall value of my artworks has increased year on year. In the past, I've been dismissive of art insurance but I think it is time to finally get serious.

Answer: By the sound of it you definitely need to take action and get yourself covered. Art is an asset with the potential to markedly increase in value over time, so the last thing you want is leave yourself exposed and out of pocket. Think of all the care and thought you've put into accumulating your collection; it is only natural that you should adequately safeguard it.

Factoring art damage and theft into your current home insurance generally costs around Dh20 annually per Dh10,000 of coverage — although it could be less if you have a decent security system. However, if the total contents value is more than approximately Dh50,000, you may be asked to provide an itemised, descriptive list with values.

For serious collectors like yourself, it could be advisable to seek the services of a specialist insurance provider.

The main difference between a standard home policy and specialist insurance in this field is the inclusion of specific cover relating to fine art and collectables, which can incorporate anything from stamps and wine to magazines.

First step

Either way, the first step is to assess the value of your assets. The best thing to do is to insure all pieces from the same period of time with the same policy for damage. On the other hand, if you want to insure for value, it is better to sort based on the artist and establish a separate policy for each individual collection.

Make sure you consult with an independent financial adviser who can talk you through the options.

Calculating how much insurance you require entails assessing the total value of your art with current appraisals and original sales receipts.

Photographing and documenting your collection, or at least the most valuable works, is also wise in the event a claim needs to be made.

If the total sum for insurance is more than you afford, it is still advisable to buy as much as you can; theft, loss or damage does not generally affect entire collections.

It is important to note that art is not a static asset. Regular appraisals should take place to ensure that the value is as up-to-date as possible.

For example, some insurance companies will automatically cover an investor for newly purchased items up to 25 per cent of their current portfolio. Nevertheless, insurance companies need to be informed of any new art purchases within 30 days.

Furthermore, the policy should have a feature to automatically increase the value of any item of art by up to 200 per cent if the artist dies during the period of insurance. In the event of an artist's death you must review the insured sums within 12 months to ensure you have the right level of cover.

Fine print

Above all, it is critical that you understand your insurance policy. Read the fine print and ask every conceivable question about loss or damage. Key here is whether or not the artwork is insured during transit. This isn't usually the case, so you will need extra insurance if you move your collection. Again, an independent financial adviser can assist in explaining the nuances.

The writer is Director, General Insurance, Nexus Insurance Brokers. Opinion expressed are his own and do not reflect that of Gulf News.