As residents of Los Angeles begin the complicated process of rebuilding after fires wiped out more than 15,000 homes and businesses, the last thing anyone facing that future wants to hear is that they weren’t adequately insured. A recent study by the University of Colorado Boulder, however, found that three-quarters of people who lost their homes in the 2021 Marshall Fire that ravaged suburban Boulder County were not fully covered. In fact, one-third of homeowners were severely underinsured, holding coverage for less than 75 percent of their home’s value.
In light of current events in L.A., North Carolina, and Hawaii, we thought the topic of insurance was timely, if only to nudge readers into double checking and confirming that their valuables are covered.
How Do Disasters Affect Premiums?
It’s safe to say that insurance premiums will increase no matter where you live. Insurance is a numbers game—lots of people buy into a plan to spread the risk as widely as possible. And then the probability of loss is factored in. With so many big events like hurricanes and wildfires, many companies have come to the point where they simply can’t charge enough in premiums to cover the inevitable devastation. In Florida, for example, almost no one will cover structures built within five miles of the coast. In L.A., more than a year ago, many insurance companies pulled coverage in areas at the highest risk for wildfires and mudslides because it’s not a question of if but when and that risk was just too high.
When this happened, state governments stepped in and created their own insurance funds. The problem with these funds, one agent explained, is fairly fundamental: states’ asset to liability ratios are not held to the same standards and regulations as the insurance industry is. If a state doesn’t have enough assets to pay out on claims, they will have to tap into other funding sources, essentially robbing Peter to pay Paul.
On top of that, citizens often lay blame on governments for not being able to protect them from disasters. In L.A., for example, lawsuits have been filed against municipalities claiming they should have enough water on hand to fight the fires. Legal battles such as these further drain the government’s coffers and can impede the payment process.
Know Before You Need It
Art does—and doesn’t—fall under your general homeowner’s policy. At one time, art and jewelry were covered, but because people started gaming the system, companies capped the payout; some companies pay as little as $2,500 per work of art.
To make sure you are covered, you need a supplemental “personal article policy.” These floater policies are fluid, meaning you can add and subtract objects without having to create a whole new policy. The catch is that you need to prove every items’ value.
Market Value
As trustworthy as you are, you can’t just call your agent and give him an amount you need to cover your collection; you have to have an up-to-date appraisal. (See Western Art & Architecture Collector’s Notebook April/May 2022 for more information on appraisals.) These appraisals document the replacement cost of the works in your collection, i.e., the cost of buying a work of art that is of “like kind and quality.” An appraiser will photograph the objects you want insured, condition report and document things like artist’s signature, dimensions, medium, framing or base, and what, if anything, is on the back or underside of each piece of art. Then the appraiser analyzes the market to determine the cost to replace each work of art if you had to buy it again.
Appraisals can be time consuming and get expensive but once you have it done your appraiser can update values on art that has increased rapidly. If you don’t have much art, you can also call the gallery where you purchased pieces and ask them to send you a current valuation document on their letterhead. They can substantiate the current market value as long as they are still selling those artists’ work.
In a 2024 interview for Antiques and the Arts Weekly, senior vice president and fine arts and valuable collections product manager for Chubb, Laura Doyle suggested that collectors with high value items have appraisal updates done every three to five years, but for works in art markets that tend to appreciate quickly, Doyle suggests a one to two year revaluation.
Mitigation
These personal article policies on art tend to be surprisingly reasonable. Jewelry is another story—these items are easily damaged or lost because we wear them, and they are easier to steal then fine art. But fine art, once hung, is relatively safe because it is kept out of harms way.
With large collections of significant value, insurance companies have underwriters who can visit your home and create a report with suggested ways to limit your risk of loss. It’s good to use the same company you use for homeowner’s policy because these policies should jibe, but also because if there is, say a fire or flood, the reimbursement processed can be streamlined. But it’s best to call around or speak with a broker who can compare several companies to find the best coverage for you.
Mitigating loss is not only a good way to lower your rate but it’s a good piece of mind. There are lots of great security systems that integrate burglar alarms with fire, water, temperature and humidity controls.
Interestingly, many companies no longer offer discounts for installing a sprinkler system in your home. The problem with these systems is that, along with putting out the fire—a fire that may have been easily handled with a fire extinguisher—they douse your entire home with water and that water damage can destroy floors, furniture and art, as well as soak your walls.
Other Concerns
It’s best to consider transporting art. If you take a painting out on loan, for example, you need to have the gallery clearly state that that their insurance covers the art while in your car and at your home while you make up your mind. If not, your insurance will not cover any damage, so you could be on the hook should anything happen. Once you do buy something, however, it is important that you let you agent know so he or she can add that to your personal articles policy. Savvy collectors will call their agent before they take possession of expensive works of art to make sure they are covered.
Essentially, collectors, the best defense is—you guessed it—a good offense. Call your agent, go over your coverage, and take the next steps to getting everything insured. Whatever you do, don’t wait until you need it.
How to Help Artists In Need
Many artists in L.A., South Carolina, Hawaii and other areas stricken by wildfires, floods, hurricanes, and other disasters have lost everything—art, archives, supplies, computers with their clients and gallery information. If you would like to help, please go online and research funds and resources in need of money and donations. Because there are a few people out there who have no problem taking advantage of those in need, we strongly recommend double checking the organization to make sure they are legit.
Some organizations to check into include:
The National Heritage Responders hotline at 202-661-8068 to talk with trained conservators and collections care professionals administered by the Foundation for Advancement in Conservation.
For questions about saving family heirlooms and personal collections, email the National Heritage Responders at NHRpublichelpline@culturalheritage.org.
Check out FEMA’s site, https://www.fema.gov/disaster/recover/save-family-treasures.
Grief and Hope, https://www.gofundme.com/f/help-rebuild-the-lives-of-las-artists-and-art-workers, a Go Fund Me effort in Southern California
North Carolina Arts Disaster Relief Fund operated by the North Carolina Arts Foundation is actively supporting artists, so contact them:
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