Because the value of fine art and antiques is based on both authenticity and condition, good documentation is essential. Can you imagine owning an original Picasso valued at $2 million, with no documentation, and trying to get that amount from the insurance adjuster after it’s stolen?

Another problem common to fine art and antiques is valuation. Replacing this type of property is usually not even possible. What is the replacement cost of a Picasso? What is the replacement cost of your antique hand-carved table? Even if it can be replaced with a new, identical table, does its historical value often not exceed, sometimes far exceed, the value of a new table?

Because replacement cost coverage simply does not apply to these types of items, most insurance policies now settle for these losses at the market value at the time of loss. That’s good news for you. The bad news is that the burden of documenting what you have falls entirely on your shoulders. Another difficulty with insuring this type of property is that the value can increase while your coverage remains static, especially if you schedule the items. With each passing year, your coverage becomes more and more inadequate.

So how can you solve documentation and valuation problems for your fine art and antiques, and still be protected against underinsurance due to inflation? You can choose between two types of insurance: schedule or not schedule.

Scheduling is the strategy used and recommended exclusively by the insurance industry to insure this type of property. It requires you to document what you have at the time you insure it by providing a credible appraisal and often a photograph. The item is then scheduled for the appraised amount and an additional premium is charged.

These are the advantages of scheduling your works of art and antiques:

• The documentation problem is solved before any claim. Items on the list are valued at their market value.
• Most fine art-only insurers include settlement amount coverage (meaning they pay you the scheduled amount for a theft or no-value total loss).
• You have the option of adding glass breakage and other breakable items to the schedule. If breakage is a big concern, scheduling the item with breakage coverage is the best course of action.

Scheduling leaves you vulnerable to the problem of inflation, unless you’re willing to incur the time, expense, and inconvenience of reappraisals nearly every year.

The second insurance strategy is one that I devised for my clients in order to solve the problem of inflation without the hassle and expense of reappraisals. It has three parts and works only if your homeowners policy has no dollar limits for paintings, collectibles, and antiques. Very few homeowners policies have a dollar limit on these items, but be sure to check yours just in case.

Here are the three parts:

• Purchase the optional special risk coverage rider for your personal property. Increases the total cost of homeownership by 10 to 15 percent and provides coverage for any accidental loss, except for some exclusions. Covers losses not covered by a basic homeowners policy, such as paint spills on your old carpet or piano, water damage to your paintings or antiques from a leaky roof, etc. It has very extensive coverages, not only on fine art and antiques, but also for all your other belongings.
• Increase the total homeowner’s limit for Coverage C (Personal Property) high enough to cover all of these valuables, as well as all of your other personal property. Most homeowners total loss policies don’t have enough contents coverage to pay for all these treasures and all your other belongings.
• Get photos of everything and appraisals on all items where authenticity is vital to settling a claim. Store photos away from home, at work, or in a safe deposit box. If you fail to store this critical documentation off-site, this strategy will fail and you will be extremely disappointed at the time of claim.

With this method, you don’t need to get regular evaluations. When you have a claim and need a current appraisal to document the value of the claim, take your original appraisals with photos to a dealer or appraiser. A hidden benefit of this method: The insurance company fully pays the cost of the valuation as a loss adjustment expense!

Here are my bottom-line insurance recommendations for insuring fine art, collectibles, and antiques:

• For high-end pieces (ex: expensive paintings), especially if you can get your appraiser to agree to send you annual value updates, I recommend scheduling. Scheduling fine art makes it much easier to settle claims, with no arguments about value, unlike no scheduling, where you have to prove the authenticity and value of what you lost.
• For glassware or other highly fragile items, including antique glass, I recommend making an appointment if you want breakage coverage. Remember to add optional breakage coverage to the policy when you schedule.
• For most other treasures, I recommend the three-part plan, but only if you keep the necessary paperwork faithfully away from home.

If you have any type of property that is very valuable and can be stolen, such as jewelry or fine paintings, install a central burglar and fire alarm. Installation costs are typically $200 or less. The monthly cost to monitor the alarm is around $30. Reduce the risk of losing an irreplaceable treasure and receive a 10 to 20 percent discount on your home bill.