COA 4131 1st Edition Lecture 16 Outline of Last Lecture I Introduction to Insurance and Personal Risk Management II Planning a Personal Insurance Program III The Insurance Management Process Outline of Current Lecture I For Sale A Mistress a Sheep II Why Insure Art III Insurance IV Types of Coverage V Terms VI Coverage Considerations VII How Much Coverage Do You Need VIII Cost IX Insurance for artists X When Art is Stolen XI Art Prices XII Preventative Conservation and Risk Management XIII Companies XIV Property and Liability Insurance XV Liability and Auto Insurance Current Lecture A For Sale A Mistress a Sheep a Picasso 1932 i Woman Sitting by the Window ii Sotheby s priciest art offering in a long time iii Sotheby s is one of the worlds biggest art auctioneers iv Expected to sell for 40 55 million 1 Sold for a lot more v European collectors are more calm about their economy this year when the economy is down or shaky 1 Dealers are more confident in their art values for this work b Damien Hirst 1995 i Away from the Flock Divided ii Hirst s best known formaldehyde works of a dissected sheep iii Asking price 2 6 4 million iv Sellers signed a contract to set out the reserve price and the seller s commission v Collectors will sometimes pay a premium for art B Why Insure Art a People have attachments to their art work pieces and are likely to replace it with another one b People often do not know he value of their art until they become damaged or lost c Art has investment value i If an artist dies the value may increase and many other factors ii It is helpful to also collect information about the artist to increase value 1 Not all art is created equal pricier when the artist was more popular or dies C Insurance a For combined holdings valued in the low four figures a regular homeowners or renters policy usually provides adequate protection i Some policies may not cover theft so it is a good idea to pay extra for it ii Art is especially susceptible to theft most insurance companies want to limit their exposure to such items b Can buy from many types of insurance brokers but it is better to have someone with knowledge to get someone with knowledge of art to handle the cost accurately c Advantages i No deductibles in many cases ii Coverage of recent purchases iii Typically only losses due to war nuclear disaster wear and tear or rats are excluded iv Accurate values based on expertise less hassle D Types of Coverage a Property Casaulty i Covers theft and many types of damage b Title i Protects against someone having a claim to a piece you bought 1 Offered exclusively by ARIS c Specialized Products i Personal Fine Art and Collectibles Coverage 1 For individuals ii Exhibition Coverage 1 When lending art for exhibition iii Museum Coverage 1 Specialized coverage for museums iv Corporate Fine Art Coverage 1 Coverage for art owned by corporations 2 Usually placed high up so no one can touch it or ruin it v Fine Art Dealer Coverage 1 Coverage for art dealers E Terms a Replacement Cost i The amount required to replace an item with one of like kind and quality ii No allowance is made for the intrinsic value of the piece iii No set amount is stated iv Usually updated once a year b Agreed Scheduled Value i A specific amount usually determined by a current appraisal or receipt ii Values can be updated c Current Market Values i Current value of an item within a defined marketplace ii This value fluctuated during the policy term and they put that into consideration iii The value is not fully known until there is a loss F Coverage Considerations a Two ways of covering items i Contents coverage part of regular household contents 1 Things to consider a Deductible i More difficult to get flood insurance in New Orleans right now b Per item limit i There is a maximum paid for any one item that is claimed c Restricted geographical coverage i Not covered during transit d Restricted coverage i Certain things are not covered 1 Such as breaking of fragile article or objects e Not automatic coverage for newly acquired items f Basis of valuation is Replacement Cost ii Scheduling either itemized or blanket coverage 1 Itemized coverage requires a separate description and value for each piece 2 Blanket coverage includes a total dollar amount without listing each item 3 Scheduling advantages include a No deductible b No per item limit i Except when blanketing but the per item limit should still be higher than under contents c Additional covered perils d Broader geographical range i Usually worldwide e Coverage for newly acquired items that includes automatic coverage for new pieces with a grace period for reporting usually ranging from 25 to 60 days f Basis of valuation is either agreed value or current market value 4 All of these things should be covered if you re smart G How Much Coverage Do You Need a Typically you buy insurance on agreed value b Some prices cover only the agreed value and others will pay the higher or either agreed or market value usually capped around 150 c Most insurers expect their customers to have their art appraised every 3 5 years sometimes more prices are volatile i Important to have a knowledgeable broker that knows what they are talking about d Companies recommend 100 coverage but if the art is not moved around often it might not be such a great idea i It is better to get a little than nothing at all H Cost a Title insurance runs from 1 5 to 4 percent of the appraised value of a purchase a onetime expense that protects you and your heirs i It usually covers legal defense costs b Theft damage insurance for art added onto your home insurance generally costs 1 2 annually per 1 000 of coverage i Less if you have a good security system in place c The typical year property casualty premium is 700 to 1 000 per 1 million of appraised value if there are no special considerations and up to twice that if there are i Can lower by offering to pay a deductible d Insurers main criterion is location i In the U S the riskier spots are California Florida and New York City ii The more risky the spot the less for the cost iii Earthquakes hurricanes concentration of collectors iv Midwest and landlocked places are more safe e Example i State of Florida Fine Arts Insurance Program 1 Purchased and administered by the Department of Management Service Division of State Purchasing a For fine arts on loans or owned by the state b Rate i Indoor 0 2376 per 100 of insured item s value annually no deductible I J K L
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