The insurance market used to provide broad coverage for the peril of flood with little to no deductibles. However, after seeing losses from Superstorm Sandy and other storms, flood coverage is much more restricted in fine art and other policies, so homeowners and collectors have to be wary as to whether their high-value items are adequately protected.
That is the view of Jennifer Schipf, senior underwriter in XL Group’s Fine Art business.
According to FloodSmart.gov, the US website of the National Flood Insurance Program, a one inch flood in a 2,000 square feet home can result in $20,000 of loss, a 6 inch flood in the same space $39,000.
“And that does not take into account if a $100,000 painting that may have been stored in the basement or if the level of flood is significant, on the wall,” said Schipf.
“Artwork is not the only valuable vulnerable to flood damage. We’ve seen losses from flooding because everything from currency and securities to gold bullion was stored in subterranean vaults.”
To help avoid flood damage or a loss in value of luxury items, XL Group’s Luxury Lines team suggests taking certain flood precautions. You should start by having a clear idea of the value of the work – because unlike many items found in homes that depreciate, jewellery, fine art and other collectibles often do not.
“In fact, their value is more likely to grow,” said Schipf. “An up-to-date appraisal can provide an accurate valuation that can help speed up the claims process. And to get the best valuations, we encourage and can even help our clients find an appraiser who has expertise in their type of collection.”
You should also prepare your property for the possibility of flooding. According to Schipf, XL’s property risk engineers have lent some guidance to gallery clients to see what precautions can be taken to minimized property damage. Installing a sump pump or generator and changing on-site storage practices can do a lot to stave off flood damage.
In the event of flooding, it is wise to have a storage plan. “Not only is it important to have a pre-arranged storage plan, it’s also important to make sure your storage facilities is truly prepared to handle your artwork. It should be climate-controlled and have camera monitoring, firewalls and floor drains, for instance. And stored artwork should certainly be kept off the floor,” said Schipf.