The True Cost of Being an Art Collector

Whether art is a true passion of yours or whether you look at purchasing art as an investment vehicle, there’s no doubt that it can be expensive. However, what many inexperienced buyers don’t understand is that the initial cost of the artwork is just the beginning. Whether you’re planning to purchase your first major artwork or looking to be smarter about growing your collection, we’ll coach you through some of the typical costs you can expect to pay as an art collector.

The Buyer’s Premium

Auctions are among the most common ways to acquire art, and it’s important not to get carried away as a bidder and pay more for an item than it’s worth. However, it’s less often an overheated bidding war that may cause sticker shock. Instead, it’s the amount of the buyer’s premium. This is a percentage of the auction, or the hammer price, charged to the buyer by the auction house, which can run as high as 25%. A $100,000 purchase then becomes a $125,000 purchase, and that doesn’t take into account any state sales tax. In New York, for example, the home of the nation’s premier auction houses, the sales tax adds another 8.875%, which might mean your total costs are 30% or more of the purchase price.

Insuring Your Collection

When purchasing valuable artworks, don’t expect your standard homeowner’s policy or your umbrella insurance to insure these pieces. Some less expensive items may end up covered in your homeowner’s policy in case of damage or theft, but if you own pricey artwork, you’ll likely need a separate rider on your policy. Speak with your insurance representative as soon as possible about adding the rider, or seek out insurers specializing in providing coverage for art, antiques, and jewelry.

While annual costs may vary according to the insurer, in general, you can expect to pay between 1% and 2% of the artwork’s value annually in insurance premiums. That means that a piece appraised at $100,000 will cost between $1,000, and $2,000 to insure each year, and you can do the math based on the value of your entire collection.

Art insurance does not cover wear and tear, and items displayed outside your home usually require special coverage. Before loaning a painting, drawing, or sculpture from your collection to an art gallery or museum, discuss insurance with the party to which you’re loaning the piece.

In addition to regular insurance protection from the effects of fire, floods, or theft, some collectors may want to consider purchasing title insurance for their artwork. Similar to real estate title insurance, art title insurance protects you if the provenance of the art is in any way murky.

Preserving Your Collection

Fine art is vulnerable to changes in lighting, temperature, humidity, and many other factors. That’s why preserving your collection is imperative and involves the installation of UV window protection, special lighting, climate control, and more in your home. Depending on the extent of your collection and the necessary retrofitting, this could end up costing hundreds of thousands of dollars.

Then there’s security. Art theft is a big business, and you can’t leave your property in danger. If your house doesn’t have a state-of-the-art security system, installing one is necessary. Speak with dealers or professional art placement designers for advice on the best type of security for art collections.

Storage Fees

If your art collection is limited to what you can display in your home, storage fees aren’t an issue. If your collection outpaces your display space, then storage is a must, and it’s not a matter of putting non-displayed works in the attic or the basement. You should store these works in specialized art storage facilities. In major cities, you’ll pay top dollar for such storage, but you can do it less expensively in facilities outside the metropolitan area. Keep in mind that what you save in storage fees, you could lose in the transportation fees required to bring your stored art back to your home.