Let’s say you’re an avid art collector—you’ve got a home full of beautiful, one-of-a-kind pieces that range in value from very little, to thousands of dollars. Now, let’s imagine that one day, your home is burglarized and many of your paintings are stolen, while others are damaged. You’re heartbroken… but you’re also wondering what happens next when it comes to recouping the value of your lost or damaged art.
Ideally, this is where your insurance policy would kick in and refund you the value of the art in question… unless of course your art isn’t insured!
The Fine Arts Rider
Insurance for valuables like art isn’t generally covered under overhanging homeowners insurance policies, which means you’re going to need to insure individual items under something called a Fine Arts Rider. Essentially, this is an addendum to your policy that says you own a high value item that’s worth $X that, in the event of damage, needs to be replaced in that amount.
Fine Arts Riders can be tricky, however. Art has something called “subjective value,” which means one person might value it higher than another. So, how exactly do you valuate something that has a fluctuating value depending on who you ask? You hire an appraisal service in Maryland!
An appraisal service is going to gauge the market value of the subjective item and attach a dollar amount to that item based on what it would be likely to sell for at an auction. So, for example, if a one-of-a-kind painting would fetch $10,000 at an art auction, the appraisal service would valuate that painting’s worth at $10,000.
The value of an item as determined by an appraisal company will then be written into a Fine Arts Rider. The insurance company will then accept or reject the rider as part of the owner’s insurance policy and add coverage amounts to the policy holder’s payments to reflect the new insurance. Ta-da: you’ve got insurance for your one-of-a-kind art and other valuable items!
Now, the standalone value of an item isn’t usually the only thing that’s written into a Fine Arts Rider—the age, condition, quality and prominence of an item is also usually evaluated when it comes to determining the replacement value. Replacement value is separate from total value—it’s an important distinction to make.
Think of replacement value like a car. You might buy a brand new car for $20,000, but a month later, your car is probably only going to be worth a fraction of that value—say $11,000. Why? Because depreciation kicks in! Every mile put in your car means dollars taken off in value. If you total your vehicle, don’t expect to recoup the full $20,000 you paid for it—instead, expect to get the replacement value of $11,000.
For a painting or other piece of art or valuables, the concept is the same. Your painting may have fetched $10,000 at auction, but after years of sun damage, oxidation and dust, it might only have a replacement value of $6,000!
The best way to figure out worth and replacement value is to speak with an appraisal service in Maryland before you decide to take out a Fine Arts Rider on your valuables. You’ll get a scoop for all of the financials about a particular item and be more informed as to what you can expect in a worst-case scenario.