Question 1: How do I calculate the value of the items that I need to organise for insurance cover?
Tony Richards
Answer 1:
As a general rule, items should not be insured for more than their actual worth as the insurance premium is based on the price given to the broker, with the level of risk and any previous claims made by the individual taken into account.
Tools, equipment and materials should be valued at their current replacement cost. Items cannot be insured retrospectively and so any damage or loss incurred to items that are not insured cannot form part of any insurance claim.
It is much harder to attach a cost to works of art as the items are irreplaceable. An established track record of selling work can be used as a basis for realistic valuation, but remember to keep up to date records. These should include:
- a photographic record of all sold and unsold work
- an inventory and receipts for all professional tools and unused materials
- copies of all correspondence with the insurance company
SOURCE: Arts Council England, Business Link
Question 2: There seem to be so many different insurers out there. How do I know which one I should pick?
Sally Taylor, Huddersfield
Answer 2:
All insurance companies should be authorised by the Financial Services Authority (FSA). Finding the correct policy to cover the work should be done in consultation with a broker so never take out a policy without taking advice first.
The costs of insuring are variable and negotiable. Be prepared to shop around to find the best deal to suit you and your situation.
In order to obtain affordable insurance, be prepared to spend money on improving security. The more secure an item/venue is, generally, the lower the premium should be.
Most brokers are happy to give a lower premium in exchange for a higher excess (the initial portion of any claim which the policy does not cover) so again, be prepared to do some research.
SOURCE: Arts Council England, Business Link, Association of British Insurers
Question 3: I am a design graduate and I would like to open my own studio. I have heard I may need liability insurance. What is this and are there different types that may not be applicable to me?
Darren Spencer, Doncaster.
Answer 3:
As a business owner and/or employer, you have a legal responsibility towards your employees, customers and the public. You could be held legally liable and risk being sued if an employee or a member of the public is injured as a result of your negligence or breach of duty. Liability insurance is designed to cover any compensation or legal costs that occur if the employer is found to be at fault. There are three main types of liability insurance; public liability insurance, employers' liability insurance and professional indemnity insurance. Public Liability Insurance would be most relevant to your situation but depending on what you intend to do in the future, you may need to investigate other forms of liability insurance.
Public Liability Insurance
This insurance protects against claims for accidental bodily injury or damage to property of a third party, should the policy holder be found liable. Premiums depend on the type of business you run, your turnover and the number of employees you have.
It is required by self-employed artists to cover circumstances where there is chance that someone may be injured as a direct result of their professional activities, including all types of public performance and live events, workshops, residencies, open studios and public commissions.
There is no legal obligation to take out this type of insurance but if you are working in a public area without it, you may have to meet the legal and compensation costs of any claim brought against you.
For an individual, it may seem expensive but Public Liability Insurance (PLI) is important and should be built into the cost of your annual overheads. Many Local Education Authorities, galleries and organisations now, as a matter of policy, do not employ artists who do not have PLI. If you are part of a studio group or organisation, it may be cheaper to get cover for the group as a whole. Some professional organisations and associations offer discounts on PLI policies.
SOURCE: Creative Learning Agency, Arts Council England, Business Link, Association of British Insurers.
Question 4: How do insurers work out how much it is going to cost me to get adequate liability insurance cover?
Answer 4:
The cost of insurance - known as the premium - is typically worked out using a book rating. A book rating is calculated using a base rate, which includes the insurer's costs and reflects their appetite for your particular type of business - if they want your type of business the rate will be less than if they don't. The premium is also calculated on the insurer's estimate of the level of risk attached to a particular business or industry area. The premium will be affected by factors such as your claims history, the size of the perceived risk and your approach to risk management. The safer your working environment and the fewer claims you have made, the cheaper your premium should be.
SOURCE: Arts Council England, Business Link
Question 5: What exactly does Employers' Liability Insurance cover?
Richard Simcox
Answer 5:
Employers' Liability Insurance covers claims against injury or death caused to employees in respect of working practices. If the employer is found to be negligent then the insurance enables the business to meet the cost of legal fees and compensation.
As an employer, there is a legal obligation to provide employers' liability insurance. If your business is not a limited company, and you are the only employee or you only employ close family members, you do not need compulsory employers' liability insurance. Since February 28th 2005, limited companies with only one employee, where that employee also owns 50% or more of the issued share capital in the company, have also been exempt from compulsory EL insurance.
The Government's Health and Safety Executive can levy large fines for every day an employer does not provide suitable cover.
Employers also have a legal requirement to ensure that all motor vehicles used by the company have the correct insurance.
SOURCE: Arts Council England, Business Link
Question 6: I am due to exhibit my work at a show in December. What do I need to do about insurance cover?
Anthony Lawson, Huddersfield
Answer 6:
Most exhibition venues have a works of art policy that provides insurance cover up to a certain agreed financial limit. Check that the total value of the exhibited works and the presentation equipment falls below this limit and that any high value items are individually specified. Have a look at Insurance Part 1 from the first September edition for more information on Public Liability Insurance which is closely related to exhibition insurance.
Artists working with new media should check that the venue's insurance covers all the required presentation equipment as some policies specifically exclude electronic equipment (for example, DVD/video players, projectors, computer equipment, speakers etc).
To reduce costs, some venues exclude transport to and from the gallery in their policy (referred to as 'nail-to-nail' insurance) and, therefore, this may need to be arranged separately.
Tools used during an installation may also be excluded from the venue's policy.
Many policies provide 'all risks' insurance that covers works of art against fire, theft and accidental or malicious damage, including during transport. However, check the limitations of the insurance with your broker/venue as the policy may only cover theft if a work is stolen from a locked van or from the venue when it is closed and alarmed.
Check whether the exhibition venue has public liability insurance cover for the duration of the installation and the exhibition. If not, then the risks for third party injury must be assessed and you may need to arrange this cover yourself.
SOURCE: Arts Council England, Business Link
Question 7: I have heard quite a lot about Professional Indemnity Insurance but I’m still unsure as to whether it applies to me. I am an artist but I regularly tender for public art commissions.
Margaret Plummer, Barnsley
Answer 7:
If you are in the business of selling your knowledge or skills, you may want to consider taking out professional indemnity insurance. This will protect your business against compensation sought by a client if you have made mistakes or are found to be negligent. Public art commissions will usually require public indemnity insurance for the artist. This insurance protects against claims for professional negligence to a third party should the policy holder be found liable. Arts consultants and arts businesses should consider professional indemnity insurance.
A third party can make a claim against an individual/company for bad advice or designs paid for by the third party, for example. Even printing an incorrect telephone number in a third party's advertising could be construed as professional negligence if it leads to potential loss of earnings.
One important aspect to bear in mind when considering professional indemnity insurance is that, because there can often be a long delay between an event and a subsequent claim, you need to be covered both at the time of the event and when the claim is made. This means that if you plan to cancel your policy when you close your business or retire, you may need to arrange "run off" cover for a period of time afterwards. Also, if you plan to change insurers, you will either need to arrange run off cover or get agreement from your new insurer to accept new claims for prior incidents.
One way to minimise such claims is to make sure that projects are well documented. Ensure that you set out specific responsibilities in your contracts with clients beforehand and deal with complaints promptly.
This is a specialist area and so if you are unsure as to your position, you should seek expert advice.
SOURCE: Arts Council England, Business Link
Question 8: I know that Health Insurance can be really expensive. I am currently working as a musician – do I need to consider it?
Mike Bailey, Sheffield
Answer 8:
Health and Personal Injury Insurance can be very costly but may be necessary to cover loss of earnings of a self-employed practitioner (for example, musician or dancer) who, if injured, would be unable to claim sick pay.
You are unable to claim for pre-existing medical conditions, so, for example, a musician with noise-induced hearing problems would find it difficult to claim for reduced hearing over time.
Income Protection Insurance is a policy designed to give you a regular tax-free benefit if you are injured or too ill to work, resulting in a loss of earnings. There are three main types of product available:
- Those designed to replace a proportion of your lost earnings;
- Those which cover some of your living expenses – for example, your mortgage;
- Those which provide cover for house persons.
Being too ill to work is likely to affect your earnings. What this effect may be, and how soon it will happen, will depend on your personal circumstances. Income protection insurance is designed to reduce the impact of this loss of earnings.
For more information, please visit the Association of British Insurers website http://www.abi.org.uk
SOURCE: Association of British Insurers
Ask the Expert: Insurance for Artists and Creative Practitioners