The special insurance needs of art collectors

A recent prank by an anonymous street artist shows that collectibles – which require special insurance – can become more valuable if they are damaged.

“Normally when a piece of art is damaged, it would drop in value,” Kelly Juhasz, principal of Toronto-based Fine Art Appraisal, said in an interview.

This was not the case, however, with Girl With Balloon. That painting sold for US$1.4 million earlier this month at Sotheby’s, The Associated Press reported earlier. The painting – by an anonymous street artist known as Banksy – was in a frame that turned out to contain a shredding mechanism. So during the auction Oct. 5,  part of the painting ran through a shredder, leaving half the canvas hanging from the bottom in strips.

But the buyer went ahead with the purchase anyway, AP reported.

“This is an isolated incident that is a prank by the artist who is known for this kind of activity,” Juhasz said Wednesday of Banksy. “He plays on the art world. He is part of it but yet he makes fun of it and the huge values that go with buying art, he makes fun of commercialism and extreme wealth.”

Girl With Balloon – which has since been renamed Love is in the Bin – is still worth over $1 million.

But a collector who spends that much on art needs more than a typical homeowner’s policy, Juhasz said in an interview.

Brokers placing homeowners insurance should bear in mind that risk management includes protecting art from damage. Art collections can be damaged by burst pipes or by getting accidentally knocked off a wall, Juhasz said. They can also be damaged by light, heat, humidity, insects or fire.

“When you are looking at insuring art work, whether it is one piece or a full collection, your goals are to protect and preserve that work,” she said. “Brokers should be asking their clients if they have any collectible items or valuable items that would stand out and if they understand how those items need to be stored and protected and if they understand what the current value is.”

They would normally need a separate fine art policy which covers their entire collection in all of its locations. The insurer should have on file a complete description, including photos, of all art work, Juhasz said. Whether it is art, coins or other collectibles, the broker does not need to be an expert on the valuables, but should understand the materials that are used and the environment in which it is being displayed.