Some collectors will overpay for a painting, sculpture or jewelry piece simply to display it, while others buy art for investment reasons, and stick it in storage until the market for that particular type of art rises.

When it comes to insurance, the reasons behind the acquisition of art do not matter as much as where and how the art is displayed, says Melissa Lalka, worldwide fine arts manager at Chubb Personal Insurance.

If artwork is hung on an exterior wall, coldness or dampness can damage the piece. Avoid hanging near a heater or fireplace, as the heat causes paint to become soft. Pieces in direct sunlight may also fade.

For investment pieces kept in storage, ensure climate control. Canvases become slacker or tighter depending on temperature and humidity. Lay paintings off the floor and protectively wrap them.

Transportation

Clients may acquire artwork from a gallery, loan exhibit or another collector's home. “If the piece is highly valuable, but small and portable, the client may be tempted to transport the piece on his own,” said Steven Pincus, managing partner at DeWitt Stern in New York and director of the firm's fine art practice.

“Depending on the sophistication of the collector—some have full-time registrars who keep track of every item in the collection—our responsibility is to make sure there is proper insurance in place,” he said.

He recommends that collectors hire professional art handlers to transport pieces. Artworks should only be transported by professional fine art shippers in air-cushioned, temperature-controlled, fully secured and alarmed trucks. When art is crated for shipment, secure the services of specialized art handlers to pack up the works.

Appraisal

It is also crucial from an insured value standpoint to appraise art every 3 to 5 years, given fluctuating values. Collectors should recruit the services of an art conservation consultancy to periodically examine the work for damage, like chips or fading, which can often be corrected.

Ask your clients to photograph each piece and preserve all related documentation, including provenance and title, in a secure place such as a safe deposit box. They'll need this information for insurance purposes if the art is lost, stolen or damaged.

Coverage Options

In the event of a loss, art aficionados will want “The Scream” to reflect the Munch painting, not their frustration with inadequate insurance.

Brokers with experience in fine art insurance are in the best position to provide advice on an insurer who is qualified to handle the unique claims that occur involving artwork.

Surprisingly, some art collectors believe they have adequate coverage under their homeowners' policies. Instead, each piece should be itemized on the policy or insured under separate “blanket” coverage.

Write coverage on an “agreed value” basis, in which the owner and insurer consent to the value of a work of art or other collectible in the event of loss, theft or damage.

Not only can collectors rest easy that their passionate investments are financially protected, but they also receive access to an insurer's value-added risk management services, such as infrared home scans to determine potential hot spots or cold spots, which could indicate potential electrical problems that could cause a fire or water leaks.