Valuable Articles: Knowing What to Appraise and Insure
Posted by Brian Ward on Thu, Jan 06, 2011 @ 08:30 AM
One of the biggest questions we get is what should I have appraised or why do I need an appraisal? There are lots of reasons to have things appraised; estate planning, tax planning, selling an item, insurance purposes, etc. 
Each one of these reasons can have different standards for what or why to appraise. I will focus on insurance replacement as that is what we deal with on a regular basis. Ultimately, anyone with questions on what should be appraised or scheduled for insurance purposes should consult their broker, but we have learned some things over the past 9 years that could provide insight.
Determining what or even if items should be appraised and then scheduled has become more clouded as insurance carriers are increasing value levels for what clients need appraised and in turn the insured are looking for more ways to cut costs while keeping effective insurance in place. The fluctuations within the art and antique markets have also made it more difficult to understand what may need an appraisal.
To help navigate these muddy waters there are a few things that should be kept in mind.
1. What is the goal of the appraisal and/or schedule? Some clients appraise and then have everything scheduled including $20 spoons, in essence taking the place of an inventory. In my opinion, this is not the best use of a schedule. The focus should be to create an accurate picture of those items that would be difficult or valuable to replace and determine what that minimum value or benchmark for an item should be. This benchmark will vary and a good guideline is to set a value level at which an item or group of items would not be replaced without making a claim. Would you make a claim for an item below $1,000? Is it a recent purchase that can be readily replaced that would fall under general contents?
2. Carriers are raising the value that clients are required to have an appraisal. It can be as high as 250K before an appraisal is required. The key word being required. Just because it is not required, it does not mean an item would simply be replaced by the carrier. The carrier will still want basic validation for the claim being made, so it is important to understand what may be of real value even if below the required appraisal level. For instance, there could be an inherited piece that would not reach that level, however, it may be 50K and without an appraisal it would be difficult to know the value of the piece and if it is protected by the general contents coverage. So it is important to have clear understanding of items with potential or unknown value as well as those items purchased beyond 5-10 years due to ever changing market conditions.
3. Understand what the current policy provides in terms of coverage. Each policy and carrier is different. For instance, someone that has a lot of silver and assumes it would fall within general contents coverage, might be surprised by an unexpected limit on silver in the policy. By understanding what is or is not covered under general contents, it is much easier to determine what should be appraised and/or scheduled.
By getting a strong understanding of what the goals of the appraisal or schedule are and what the current policy covers, it will be much easier to create a plan for what should be appraised and scheduled.
What parameters have you used in the past to determine what should be appraised or scheduled? If you are an insurance advisor, what recommendations do you make to clients?
