The Role of Appraisals in Fine Art Insurance

A client’s fine art collection may represent their treasured possessions or important investments and requires specialized insurance to protect against losses caused by water, fire, vandalism, theft, transit, and natural disasters. Distinguished’s Fine Art Insurance and Collectibles Insurance Program provides comprehensive coverage for priceless treasures and serves private collectors, art dealers, artist foundations, museums, and others.

Up-to-date appraisals and valuations are crucial for determining the amount of coverage a client should purchase for his or her fine art collection.

Different Collections Require Appraisals at Different Frequencies

How often a client gets fine art appraised or valued depends on the collection. The contemporary art market is more likely to fluctuate than older categories of works of art, so having current valuations is critical. A client may purchase a painting for $5,000 today, and years later, it’s worth hundreds of thousands or even millions of dollars. Pop and contemporary art is a great example of these big spikes in value. Think Warhol, Banksy, and Haring.

Types of Valuations

Insurance policies can be written on an agreed value/scheduled or blanket basis.

• Agreed Value/Scheduled: The client agrees to a reimbursement amount upfront that either equates to their original purchase price (based on invoices on file) or values determined by a qualified, professional appraiser. A formal list of covered items with their scheduled value is provided to the insurer and agreed to by the client and insurer. The amount does not change even if the market for the piece rises or falls. If it’s a piece that increases in value, as with contemporary art and any high-value fine art collection, the agreed value in the policy could fall significantly short of its market value. Clients wouldn’t be fully protected unless they had updated appraisals and coverage. Therefore, it’s essential for clients to pay attention to trends and movements in the art world and to update appraisals.
• Blanket Value: The insurer and the client agree on a broader policy limit, and in the event of a loss, the policy would be based on an item’s current market value, subject to the policy terms and conditions. This type of policy can make it easier for collectors to manage their insurance, as items will not need to be added and deleted. However, it may require extra work when a loss occurs since the current market value of the artwork will need to be determined.

If a client does not want to use the original purchase price in determining the values of the collectibles, Distinguish can also accept the following appraisal types:

• Retail Replacement Value (RRV): This is the value required to replace a property with another of similar age, quality, origin, appearance, provenance, and condition within a reasonable length of time in an appropriate and relevant market. (Appraisers Association of America)
•  Fair Market Value (FMV):  This is the price at which property would change hands between a willing buyer and a willing seller if neither felt like they had to buy or to sell and both have reasonable knowledge of relevant facts. FMV is mostcommonly used for IRS appraisals or when the client wants to sell an item. (IRA publication 561)

 The Value of Accredited Appraisers

Although appraisals are expensive, it is worth spending the money to have an accredited USPAP-compliant appraiser. Such individuals have completed the appropriate coursework to prepare IRS-compliant documentation and provide the correct comparables, cataloging, and images needed for insurance purposes. It’s also wise to ensure the appraiser is experienced in fine arts, and particularly the type of art that the collection represents.

Get Started with Distinguished Today 

To access our insurance program for fine arts, just register with us and then fill in and submit an application form. With the application, please try to include a schedule of covered property and any appraisals or invoices that you may have.

If you have specific questions about our policies, please feel free to reach out to our support team or explore our Private Collection Insurance program page for more details. 

About Distinguished Programs

Distinguished Programs is a leading national insurance Program Manager providing specialized insurance programs to brokers and agents with specific expertise in Fine Art and Collectibles, Environmental and Construction Professional, Executive Lines, Inland Marine, Real Estate & Builder’s Risk, Community Associations, Hotels, and Restaurants. Property and Liability products are distributed through a national network of agents and brokers. Serving the same core markets and partnering with the most stable and reputable carriers, Distinguished’s high-limit Umbrella programs remain the clear choice in its area of specialty for superior coverage, competitive pricing, and attentive service. Through thoughtful innovation, stemming back to 1995, Distinguished Programs fosters growth and opportunities for its brokers, carriers, and employees.

View a full list of our programs and submit business with Distinguished.

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