One thing to collect: enough insurance for art, antiques


January 31, 1993|By Lita Solis-Cohen and Sally Solis-Cohen | Lita Solis-Cohen and Sally Solis-Cohen,Contributing Writers Solis-Cohen Enterprises

Queen Elizabeth II has something in common with most collectors: She doesn't have insurance. Few can forget the monarch's pained expression watching Windsor Castle burn and her salvageable antiques and artworks being dragged out into the rain.

"She's probably the only person in the world who can afford to be self-insured," said insurance broker Bruce Perkins of Flather & Perkins in Washington, a firm specializing in fine arts insurance policies.

For those of us without regal resources, replacing charred, water-logged, or smoke-damaged artworks or antiques (or stolen broken ones) can range from being a royal pain to a financial disaster. Although the time to protect against losses is before tragedy strikes home, there's no one-size-fits-all solution. While only you can decide what risks you can live with and what insurance premiums you're willing to pay, here are some tips from experts we consulted.

"In many cases, an existing homeowner's policy may be sufficient," said Mr. Perkins. But for added protection or to avoid hassles with claims, he says, it's best to separately schedule your valuable art, antiques, jewelry and silver before a loss occurs. Another good reason for scheduling items: Deductibles generally don't apply to them, according to Bob Fergusson, a vice president of Marsh & McLennan insurance brokers in New York City. Special fine arts policies are another option.

Annapolis appraiser Mary Ellen Heibel knows the value of planning. Five times last year insurance adjusters asked her to write "hypothetical appraisals" of furnishings after they had burned. One owner's $80,000 homeowner's policy was grossly insufficient to cover her lost antiques. Another couldn't collect on an antique Oriental rug because he had discarded the charred remnants. A third client, however, had the foresight to videotape his collection, including a bed once belonging to Napoleon's sister-in-law. That visual record provided enough evidence for the underwriter to accept Ms. Heibel's appraisal and pay out on the loss.

Most people wait until disasters make headlines before scheduling their property. Lissa Cooley, an appraiser in Marin County, Calif., says she had surges in requests for insurance appraisals after the 1989 San Francisco earthquake and 1991 Oakland fire.

Consider updating your formal written insurance appraisals and reviewing your coverage every three to five years, more often if the market changes dramatically either up or down (why pay unnecessary extra premiums?), or if you buy, sell or inherit items of value.

Personal property insurance is among the cheapest available, according to Mr. Fergusson: rates for many fine arts policies vary from around 9 cents per $100 value to about 40 cents per $100 value, depending on risk factors. (Jewelry insurance generally costs from 30 cents to around $4 per $100 value.) Check with your broker: sometimes installing burglar and fire alarms with smoke detectors can save so much in insurance premiums they practically pay for themselves

Decorative but dangerous?

These policies are based on three types of compensation: agreed-upon value, normally for high-ticket fine art and antiques, replacement value, or actual cash value. There are important differences.

Chubb & Sons, a leading art and antiques underwriter, generally issues agreed-upon value policies: The established amount is paid in the event of a loss. Chubb even dispatches a fine arts specialist to advise owners of extensive collections on minimizing potential damages or losses and reducing premiums. Many collectors don't think about the location of steam or water pipes when hanging an important picture on the wall. They simply follow their decorator's advice," said Elizabeth Clement, a senior appraiser at Chubb in New York.

Agreed-upon value policies usually are the easiest to settle. If problems arise, it's usually with replacement or actual cash value coverage.

"There's no legal definition of 'replacement value,' " said appraiser David Borodin, of Frisk and Borodin Appraisers in Philadelphia. But appraisers are quick to point out that, according to the American Society of Appraisers' handbook, replacement value usually is the highest price needed to replace an artwork or antique with something of similar age, origin, quality, appearance, provenance and condition within a reasonable amount of time. (Although some items are irreplaceable because they're unique artworks or sentimental heirlooms, financial settlements can lessen the blow.)

Mr. Borodin recommends that replacement value insurance appraisals take into account an individual's buying habits. For example, collectors accustomed to paying full retail prices in specialist dealers' shops should insure their collection for more than what a replacement would cost at auction. Same, too, if you buy only the best labeled Chippendale chair without repairs, when any old one would satisfy another collector.

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