1. Keep all original receipts and bills of sale. A serious buyer will want documentation of a work’s provenance. Receipts and bills of sale are critical for authentication purposes and will avoid the expense and frustration of tracking down an artist or artist’s estate to confirm authenticity. Further, an inability to prove authenticity may significantly diminish a work’s value.
2. Keep a record of each purchase and note the price you paid. This practice will make the determination of tax consequences much simpler and more accurate. A simple way to engage in this practice, if you have original auction house catalogues, is to note the pieces you purchased, along with the price you paid for each piece.
3. Keep a record of all appraisals. Appraisals are relevant in determining fair market value of the work for tax purposes, as well as for insurance or replacement values. Each appraisal should note its purpose and include the contact information of the appraiser.
4. Keep insurance carriers updated on the status of pieces in your collection. Regularly update insurance carriers about your pieces, their values, and your storage methods. Also, notify insurance carriers when you complete a sale so that the item may be removed from your policy. Contact information for the insurance agent should be noted.
5. Keep a photographic inventory. Maintain a detailed inventory of your collection with photos. In addition to each photograph, at a minimum, the inventory should note the title, the artist, a brief description, and the date of creation. Update the inventory whenever items are purchased, sold, loaned, or donated. This practice is especially relevant to large collections with pieces in various locations. Photographs also serve to identify each piece in the collection in the event that someone handling the collection is unfamiliar with a particular artist’s work.
6. Document all background information related to the work. Note any personal connection or relationship shared with the artist, interesting stories about how the piece was created, and details about your acquisition. Also, record biographic information about the artist, previous owners, and the work’s history of exhibition. This information may be important to potential buyers seeking to form a deeper connection with the art they purchase. Auction houses like to include personal background stories that complement the piece’s uniqueness, because it ultimately drives up the purchase price.
7. Be aware of any foreign-made works in your collection. Very old works that were created in countries such as Greece, Egypt, and Italy and acquired before stronger provenance regulations were introduced may present difficult issues for collectors. Gaps in historical records complicate the determination of whether the work was legally acquired. Depending on how the works were acquired, it may ultimately be determined that the works cannot be sold at public auction and need to be returned to their country of origin. If all of this is being sorted out after the collector’s death, the collector’s estate may also be left entangled in very complex estate tax issues.

These tips may add significant value to your collection by increasing marketability to potential buyers. Do not risk the value of your investment by trying to do this from memory. Memories fade, and if your collection is large, it is easy to omit details or confuse the artwork. Further, if you die without accessible collection records, your estate will face the challenge and inconvenience of tracking down information, which may or may not be complete and will likely affect the value and legacy of your collection.

Save

Save

Save

Save

Save

The post 7 Record-Keeping Tips to Add Value to Your Art Collection appeared first on Art Business News.

Liability
General liability policies offer protection for bodily injury and property damage. The primary concern for all retail businesses is injury to customers in the frame shop or on the property. Claims in this category generally are the results of slips, trips and falls. Framers who do installation services have an increased exposure to property damage at the site of the installation. Having the proper liability limits is crucial.

A basic limit of at least $500,000, along with an umbrella-liability limit of $1 million or more, should cover most claims, depending on the size of your business. These policies are usually reasonably priced.

You should also consider employment-related practices liability and employee-benefit liability. Employment-related-practices liability protects against suits claiming discrimination in hiring, promotion, pay and termination, as well as other business practices relating to employment. Businesses providing benefits such as health insurance or retirement plans should consider purchasing employee-benefit liability. This coverage provides protection for errors and omissions in the administration of these benefit programs.

Building & Personal Property
If you own your store, you generally provide the primary insurance. Know the amount of coverage you have and what it would cost to replace the building. Insure the property on a replacement-cost basis but make sure the coverage limit is adequate. Also consider the deductible amount, the amount you feel you can financially afford to assume. The general practice is to select a $1,000 deductible.

If you lease your space, pay particular attention to the insurance provision in the lease. Your lease may require you to provide primary insurance on the building, building glass or other items.

You should pay particular attention to any improvements or betterments you make at your own expense to the property. Your lease may not address such improvements, which may include adding or removing walls, installing flooring, or improving lighting, and your policy must cover these items. You must obtain written permission from the building’s owner for any changes you wish to make.

Just as with building coverage, you should determine the amount of coverage you need on a replacement-cost basis for your shop equipment, office furniture and inventory. Also consider the amount of the loss you are willing to absorb: your deductible. Depending on the size and scope of your operation, you will want to address property of others in your care, as well as off-premises property coverage for you and your customers. In determining the replacement cost for the property of others in your coverage, be sure to include all of the property of others you have in your shop at any time.

Business-Interruption Coverage
Loss-of-business-income insurance reimburses you for lost profits due to an insured loss and may extend to include your employee payroll. It’s best to write this coverage in an actual-loss-sustained format, but you may instead choose a specific dollar amount for a specified period of time. You should review the specifics of these broadened coverages with your agent.

Extra-expense coverage will reimburse you for extra costs you incur over and above what your normal operating expenses would be for you to get your business up and running after an insured loss occurs.
Extra-expense coverage includes expediting expenses to get in equipment and stock, as well as increased costs to set up and operate at an alternative location.

Automobile
The same coverage issues apply to both owned and leased vehicles that your business uses. Most insurance agents recommend a limit of $500,000. An umbrella-liability policy extends excess liability coverage beyond your basic limit.

Uninsured and underinsured coverage generally carries the same limit as a liability policy and provides coverage for medical needs.

The physical-damage portion of the policy provides you with comprehensive coverage for fire, theft, vandalism and glass replacement, along with coverage for collision with another vehicle or an object. Most agents recommend a deductible of $250 for comprehensive coverage and $500 for collision coverage. Consider a no-deductible, full glass coverage rider for a small fee, along with coverage for towing and reimbursement for rental vehicles. Consult with your agent about limits and premiums.

Make sure that the title to any owned vehicle insured on a business policy is in the name of the business as it pertains to insurance. If you lease the car—whether from a leasing company or an individual—secure a written lease to reduce the chance of claim denial.

Workers Compensation
Frame shops with employees generally need to purchase a workers’ compensation policy, even if the business only occasionally hires help. Each state has its own laws regarding policy requirements. Some states have inclusion or exclusion elections regarding business owners and close family members. Consult with your agent regarding these and other state-specific issues.

If you, as the owner, choose not to purchase workers’ compensation coverage, you should consider a disability-income policy to provide income if you become disabled. It will also free up funds you would normally take in income to increase the pay of whoever absorbs your duties and responsibilities. You would also need an individual- or group-health insurance policy to cover your medical needs.

Consider developing an employee-safety pamphlet or manual with safety procedures to follow on the job, including procedures for reporting unsafe conditions and injuries.

Business Continuation & Key Employees
As the owner of your business, consider who would be in charge of the operations if you were gone for an extended period of time, how well-trained this employee is in all aspects of the business operation and how this employee would then receive compensation. Consider what would change if you were to die. Consider whether someone in the business would want to buy the business and whether this employee would have access to adequate funding to do so. If you employ such an individual, you may want to purchase a business-continuation insurance policy addressing a written buy-sell agreement that life insurance would fund.

Determine who is absolutely key to the success of the business operation. You may have a lead framer, a production coordinator or another employee that you heavily depend on. Give consideration to the value that this person brings to the business and the financial effect of this person’s death or disability. You may choose to insure this individual with key-person insurance to compensate the business for lost revenue and production if this key person were to become disabled or to die.

Shop owners operating successful businesses face many challenges. You can ease the matter of insurance decision-making with the aid and consultation of a knowledgeable and qualified insurance agent. Consult with this agent at least annually to review your insurance in detail. The agent should review not only what policies you currently have but also areas of exposure your insurance program does not currently cover.

Other Coverage Considerations

– Data breach: This coverage is more recently available for small businesses and is reasonably priced for the industry. It covers both electronic- and paper-file data breach.
– Detached signs
– Cash and checks
– Credit card receipts
– Data, media and programs
– Floods and earthquakes

Paul Kotnour has worked in marketing business insurance for nearly 40 years. In addition to insurance marketing, he has helped clients and attorneys establish business continuation plans, retirement plans and estate plans. He has also marketed health insurance, retirement plans and disability and life insurance. He holds the designations of chartered life underwriter and chartered financial consultant. His wife, Pat, owns and operates a framing gallery, so he has an intimate knowledge of the exposures the industry faces today.

The post Critical Coverage: Why Should Schedule Annual Reviews with an Insurance Agent appeared first on Art Business News.