The True Cost of Being an Art Collector

Whether art is a true passion of yours or if you look at purchasing art as an investment vehicle, there's no doubt that it can be an expensive endeavor to collect. However, what many inexperienced buyers don't understand is that the initial cost of the artwork is just the beginning. Whether you're looking to purchase your first major work 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 the item than it is worth. However, it’s less often an overheated bidding war that may cause sticker shock but the amount of the buyer’s premium. That is a percentage of the auction, or “hammer” price, charged to the buyer by the auction house, and it can run as high as 25 percent. A $100,000 purchase then becomes a $125,000 purchase, and that is not taking into account any state sales tax. In New York, for example, home of the nation’s premier auction houses, the sales tax adds another 8.875 percent, which might mean your total costs are 30 percent 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 will 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 one and two percent of the artwork’s value annually in insurance premiums. That means a piece appraised at $100,000 will cost between $1,000 to $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 of 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 are 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 is 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 is security. Art theft is big business, and you cannot leave your property in danger. If your house does not have a state-of-the-art security system, it is necessary to install one. Speak with dealers or professional art placement designers for advice on the best type of security for art collections.

Storage Fees

If your art collecting 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 is 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 will 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 – which may run as much as $12.50 per square foot in New York City – you could lose in the transportation fees required to bring your stored art back to your home.