Buy art insurance cover on agreed value basis to avoid claim dispute

Art insurance offers protection against most of the risks like burglary, fire, water damage, accidental damage, terrorism, and many more

A painting by the renowned artist S H Raza, valued at Rs 2.5 crore, was recently reported stolen from an auction house’s warehouse in south Mumbai. It was last seen in March 2022, and the theft was discovered in 2024 when the owner requested it be auctioned. This incident highlights the importance of insuring artwork.
 

Key risks and coverage

Expensive works of art, whether privately owned or displayed in public galleries, face various risks. “They are exposed to burglary, fire, water damage, accidental damage, terrorism, and so on,” says Gaurav Arora, chief of underwriting, claims, property and casualty, ICICI Lombard General Insurance Company. Natural disasters can also affect them. Additionally, they may suffer on account of vandalism, or mishandling during transportation or exhibition.

Art insurance offers protection against most of the risks mentioned above. “Buyers of art insurance must carefully read the policy
document to understand what is covered,” says Parthanil Ghosh, director and chief business officer, HDFC ERGO General Insurance. Several private and public sector insurers offer art insurance.

Major exclusions

Art insurance policies do not cover certain issues. “Major exclusions include natural ageing, normal wear and tear, confiscation by authorities, consequential losses (losses due to secondary effects), and so on,” says Arora. Wilful destruction and mysterious or unexplained losses are also not covered.

“Damage resulting from repairing, restoring, and retouching is another exclusion,” says Ghosh. He adds that rust, oxidisation, damage by moths or vermin, warping, and shrinkage are also excluded. “Inherent defects, improper storage, handling and maintenance, price depreciation due to market fluctuations, political risks and damage are excluded,” says Ramit Goyal, chief distribution officer, Future Generali India Insurance.

Determining value and sum insured
 

A certified appraiser with expertise in art valuation typically determines the artwork’s worth and issues a certificate. This forms the basis for the sum insured. “The valuation expert considers factors such as the artist’s reputation, the artwork’s condition, market demand and comparisons,” says Goyal.

Cost of insurance

Ghosh states that premium rates range from 0.25 per cent to 0.50 per cent of the sum insured, with actual rates depending on the collection size, security measures, and past loss history.
 

According to Arora, premiums can vary between 0.10 per cent and 0.40 per cent, depending on the specific risks the artwork faces. “The premium depends on factors such as the building’s security, transit frequency within and outside India, coverage needs, packaging quality, and risk mitigation measures like fire extinguishers, burglar alarms, and CCTV cameras,” he says.

Goyal adds that the artwork’s type, condition, age, location, and claims history all influence the premium.
 

Crucial purchase tips
 

When insuring artwork, make sure a qualified professional properly appraises its value, and the sum insured is based on it. “It is ideal to have an agreed value policy where the insurance company and the policyholder agree on the value upfront. This prevents disputes over its worth in the event of a claim,” says Goyal.
 

Policies may come with a deductible, which is the amount the insured must pay before the insurance coverage takes effect. “Policies with no deductibles have higher premiums. Find the balance (between deductible and premium) that works for you,” says Goyal.
 

Finally, Arora suggests declaring all the risks related to the art piece in the proposal form.

Points to heed when making a claim

- Inform the insurer promptly whenever there is physical loss or damage
 

- Provide details of the incident – how the damage occurred, when it was discovered, and so on
 

- Submit documentation proving ownership of the artwork
 

- Submit a copy of the valuation report
 

- Do not send the painting for restoration without assessment of the loss by a certified valuer/appraiser
 

- In case the artwork has to be restored, then restoration bills will be required
 

- In case of burglary, file an FIR promptly