"The wealthy are again parking their cash in art."¹
- David Nahmad, a Monte Carlo-based art dealer who unsuccessfully vied for Alberto  Giacometti's bronze sculpture "Walking Man I." It sold at the February 3, 2010 Sotheby's auction for a record $104.3 million.  

Collecting art is a passion for many affluent consumers. However, private collections—a term that includes everything from paintings and sculpture to antique furniture, wine and jewelry—are not just culturally and aesthetically valuable. They’re also tangible assets that should be addressed formally in wealth management plans.

Many collectors bristle at the suggestion that their carefully honed collection is a commodity to be sold. However, acknowledging (and clearly defining) the investment value can help your clients make smarter decisions when it comes to protecting the collection over time. For example, art collections can be included in trust, estate and wealth planning. Donations of art to charities can ease tax burdens while being a philanthropic gesture to a beloved charitable institution. A collection also can be leveraged to get a loan, offering a discreet form of collateral. Yet these options only work if the art is in excellent condition, and if the value is clearly understood.

Distinct insurance coverage is available for fine art, jewelry, wine, antiques and other collectibles, yet many include these items in a homeowners policy and unknowingly diminish their protection. Regardless of the overall policy limit, homeowners policies generally cap limits on contents coverage. The value of covered items also may be subject to depreciation. Insuring high-value collections appropriately can provide broader, more flexible protection.

Whether your clients buy for aesthetic or investment purposes, the loss of art—through partial damage or total destruction—requires time, money and planning for conservation or replacement. Proper insurance, updated appraisals and sound risk management make the foundation of a sound art/asset protection plan. Independent insurance agents or brokers can point you to the best-in-class providers. Look for a policy that includes:

• Coverage for all types of collectibles and art media
• Worldwide protection
• Immediate coverage for new acquisitions
• Coverage for items in transit or on loan for exhibit

Up-to-date appraisals are key
An updated appraisal will confirm the amount of insurance coverage needed to adequately protect a collection. This is especially important of contemporary, modern and Old Master collections, which have seen strong price increases in the past five years.  On average, we recommend seeking new appraisals every three – five years, depending on the market fluctuations of your particular collection genre.

Appraisals can be written for different purposes and require different types of valuation methods. Fair market valuations are predominately for tax purposes, while replacement cost valuations are almost exclusively applied to insurance policies. Replacement valuations tend to be higher than fair market value, due to fact that in the event of a claim the insurance carrier must go to the open market to replace the item with similar and like kind and quality within a limited period of time.

To find a qualified appraiser, the American Association of Appraisers and the Society of Appraisers have websites where their members are listed.

Katja Zigerlig is Assistant Vice President of Art, Wine and Jewelry Insurance for the Private Client Group at Chartis.

1 Sculpture Sets Auction Record. The Wall Street Journal. p.A6. 2/4/2010

Coverage provided by a member company of Chartis Inc. The descriptions contained herein are summaries only. Please see actual policy for full terms, conditions and exclusions. All submissions are subject to underwriting guidelines. Coverage may not be available in all jurisdictions.