Art and Insurance Series #2:

Insurance - What the Heck Does That Have to Do with Me?

Insurance - What the Heck Does That Have to Do with Me?

I speak with several people each day who have had some type of loss. Sad to say, typically many have never read their insurance policy, which means they are not sure of what is covered and what is not. I hear things like, "My policy is supposed to cover everything," and/or, "I want what I think the value is." More often than not I hear, "I don't ever read my policy, much less what comes in the mail from my insurance carrier."

I must confess that prior to becoming involved with insurance, I was guilty of the same. I never read my policy nor did I know what was covered. There was just an assumption made that I would be taken care of no matter what the loss. To me, at that time, insurance was not that big a deal and I didn't see spending (wasting) time to read what came in from my insurance carrier. Then, let's not forget all the "junk" mail that is sent by the insurance carrier. I get rid of junk mail, unopened. Actually it was kind of upsetting that my premium dollars were paying for the waste of sending me so many things. One time I even threw away a rebate check from the insurance carrier because I didn't open the envelope. I didn't find out until much, MUCH later that a check was sent to me.

The wake-up call came after I became involved in the insurance industry. I was shocked to find out what was not in my policy. I decided right then and there that I would not just handle a claim but I would also take the opportunity to answer any questions about a policy and/or insurance in general.

The purpose of insurance is to "indemnify" the insured who has had a covered loss. Indemnification is basically putting things back the way they were prior to a loss or event. It is a compensation for the loss, not a way for the insured to make a profit. The ones who seek to profit usually do so by using a five letter word, "fraud". (For legal advice please consult your attorney.) Insurance carriers take on a large portion of the risk of you having a loss that is covered under your policy. This is why premiums can be so varied; the greater the risk, the greater the premium.

There are a few important "words" and or "phrases" in insurance that everyone needs to be familiar with. Some of these include:

• Covered Property:

  Your policy is specific as to what is covered and what is not covered. A policy can be very general or specific to certain items. Know what is covered.

• Causes of Loss:

  It is important to know what "events" are covered. Here again, a policy can be specific stating the exact "event" which triggers coverage or it can be what is referred to as "open" or "all" risks which would cover any loss that is not excluded.

• Coverage Exclusions:

  A policy typically has the following two sections built into the policy, 1) Property not Covered; and, 2) Exclusions. While your policy may be referred to as an "all risk" policy, more often than not there are specific things that are not covered and/or specific events that are not covered at all.

• Coverage Term:

  When does your policy go into effect? Your policy provides coverage for a certain term. Typically coverage is for one year. Keep in mind though that if the premiums are not paid and kept up to date, your coverage will lapse and your policy could be cancelled or non-renewed at the end of the term. If you are throwing away without reading things sent to you by your insurance carrier, you take a risk of overlooking when a premium payment is due or that your policy will no longer be in effect after a certain date.

• Coverage Territory:

  What location(s) do I have coverage for? If you are on a buying trip or exhibition in Europe and there is a loss, your policy may not cover the loss because your coverage may only be for the USA. Because of this, your claim will be denied. If you travel abroad, keep in mind the area your policy covers.

• Valuation:

  Now this can be an upsetting area when a loss happens. Just because you paid a certain price for something doesn't mean that the claim will cover the amount you paid. Everything changes in value. Who knows, your settlement could be more than what you paid for an item. Your policy will have a Valuation Clause that explains how any settlement will be made. You may believe that your work has a great value but if that value has no support, you may be in for a shock. Keep in mind that sentimental value equals no value in insurance.

• Excess Insurance:

  If you have this clause in your policy, the insurance carrier is simply saying that you have permission to have more than one policy that will cover a loss. It is not uncommon for coverage to be split between two carriers. Keep in mind that the purpose of insurance is to indemnify and not to profit. Keep in mind that should you choose to have more than one policy, you need to be familiar with the additional and/or excess insurance clause in both policies.

There are many types of insurance, such as Workers' Compensation, Home Owners, Tenants, Vehicle, Recreational Vehicles, Medical, the list goes on. There is a policy for just about anything, and if there isn't one that would meet your needs, one could be written for your specific coverage needs.

So, the question - What the heck does that have to do with me? It has everything to do with you. Fine arts are no less valuable than a vehicle; in fact the value may be many times greater. We think nothing of insuring our home because this is just what you do (or the lender requires you do it). God forbid should your house burn down it is a great relief to know that you are protected and a new house can be rebuilt under your insurance coverage.

In the town where I live, many businesses in the downtown area share a common wall with the next door business. This is very common in most downtown areas. A gallery that had been in operation for many years shared a common wall with a next door business. A fire started next door and when the flames hit the roof the gallery’s roof also caught fire. The end result was both businesses suffered a total loss. The fire had destroyed everything. So much so that the remaining walls had to be demolished. There was insurance in place to cover the building, however, there was no insurance on the 100+ paintings in the gallery, many of which were on consignment. This is a hard way to learn that sometimes paying the premium is a lot cheaper than the loss which can occur if there is no policy in place.

Think about the risk you are taking by not having insurance on your work. Is it worth the saving of the premium? Doesn't your work have a greater value?

No matter what "business" one is in, insurance is highly recommended. The loss would be too great without it.

Art and Insurance Series

Shaunda Clifton, fine art claims adjuster and writer, will be contributing a series of articles on insurance and the artist for Fine Art Registry. Read the first article in the series, and look for future articles on the following subjects:

• Art and Insurance Series #1
  I Filed My Claim, Now Where's My Money?
• Art and Insurance Series #3
  Five Reasons Why Artists Need Insurance
• Art and Insurance Series #4
  Insurance is Not "One Size Fits All"
• Art and Insurance Series #5
  OK, So Do I Go to My Local Agent?

— by Shaunda Clifton  |  July 27, 2009  |  Print Version - PDF

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