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Heritage Appraisals Publications


Insurance Coverage Appraisals: When and Why You Need One

For collectors of fine and decorative artwork, sculpture, jewelry, high valued collectibles and other rare/unique items, insurance coverage is necessary for a number of reasons.

In general, insurance coverage for these types of items may not be as easily obtainable as one might expect. Many insurance companies require a formal appraisal prior to adding these item(s) to a policy or may not even offer coverage of such personal property and the client will need to acquire an additional/umbrella rider. Most insurance companies have very strict guidelines on what they offer coverage on and the value threshold per item that requires a detailed appraisal. Also, general coverage may not include situations such as damage from a party other than the policy holder, travel/transport insurance and coverage outside of your private residence (framing/restoration services, moving to another location or placing on loan at museum/gallery/consignment etc.). These are additional needs that are sometimes not taken into consideration when procuring coverage, but should be addressed prior to policy agreement.

As you can imagine, insurance companies commonly cover general “household goods” and when a client has rare and unique items, these pieces need to be documented properly so all parties involved are aware of exactly what are the items, details regarding the pieces and how the appraiser estimated the value based on market comparables. This appraisal process educates everyone, their significance and future possible market fluctuations to safeguard coverage is adequate and the timeline for re-evaluations is properly assessed.

This ensures that if anything happens to the items at any point in the future, the proper steps have already been taken and the claim will be as streamline as possible. Also, having a qualified appraiser to regularly update values based on market trends (suggested every 5 years) protects that the client will not be under/over insured during their policy period. Another aspect to consider is if the appraised values are grossly inadequate/inflated. If so, the client will be paying the deductible and premiums based on these values, which could be far lower/higher then appropriate.

For rare, unique and original items of personal property, appraisers have also been able to assist in investment evaluations determined by the past market assessments of similar items and future increased or decreased earning potential of such items. This assistance may be significantly helpful on many levels to collectors with such needs. Making additions/subtractions to a collection based on investment strategies could minimize risk and insurance coverage overhead.

Lastly, most clients do not consider, especially artwork, the long-term care needed to keep the piece(s) stabilized and in the best possible condition. Like most things, all pieces of personal property have their own aging processes and require different levels of care and up-keep. Even if a piece does not immediately present with readily apparent visual issues, an appraiser can determine the current condition of a work, the conservation requirements in its existing state and the estimated future needs to maintain the piece. A piece that is restored regularly can save considerable restoration fees and unnecessary value decreases in the long run.

In summary, taking the proper steps and precautions to appraise a collection before disaster strikes will protect from much preventable hardship.

Kelly Knoll, ISA CAPP – President/CEO of Heritage Appraisals
International Society of Appraisers – Certified Personal Property Appraiser


Past Vs. Present Appraisal Requirements/Differences

Every day we receive calls from clients curious about the appraisal process, asking what makes us “qualified” to appraise their rare and unique item(s) and what they should expect through the project. We also receive requests to just create a “simplified” appraisal on letterhead. Although this was an accepted/common practice some years back (pre-1990), requirements today have greatly elevated the quality and thoroughness of appraisal reports. Even when something “simplified” is requested, we are still obligated to follow certain guidelines and create an appraisal report that abides to current standards.

The first thing we explain is the credentialing/educational designations and the USPAP ethical practices required by the appraisal organizations that hold the appraisal industry to the highest standards/expectations. This ensures that qualified appraisers will develop and deliver a descriptive report and trustworthy results.

Below are some descriptions of the primary elements referenced above.

 Credential Designations (ISA – International Society of Appraisers)

Member– ISA

  • Completed the core ISA training in appraisal theory, methodology, ethics, and report-writing standards and has documented three or more years of market-related experience.

Accredited Member– ISA AM

  • Official designation of a qualified ISA appraiser with a declared specialty and 700 documented hours of appraisal-related experience.

Certified Member– ISA CAPP

  • The highest achievement in ISA credentialing and the appraisal industry, signifying appraising expertise, professional development, and advanced skills. An ISA CAPP member has 900 documented hours of appraisal reporting and has passed the CAPP examination.

USPAP – Uniform Standards of Professional Appraisal Practice

The purpose of the Uniform Standards of Professional Appraisal Practice (USPAP) is to promote and maintain

a high level of public trust in appraisal practice by establishing requirements for appraisers. It is essential that

appraisers develop and communicate their analyses, opinions and conclusions to intended users of their services in a manner that is meaningful and not misleading.

The Appraisal Standards Board promulgates USPAP for both appraisers and users of appraisal services. The

appraiser’s responsibility is to protect the overall public trust and it is the importance of the role of the appraiser

that places ethical obligations on those who serve in this capacity. USPAP reflects the current standards of the

appraisal profession.

Report-Writing Standards

A well-constructed report can meet the requirements of being objective, complete, accurate and not misleading only if it reflects the uniqueness of each situation and presents arguments (either for or against a conclusion) in a well-written and convincing fashion.

 Reports should include the following:

  • Documentation of why the appraisal is being conducted (the intended use)
  • What the appraiser is being asked to conclude (the objective)
  • What conditions surround the appraisal that could affect the appraiser’s conclusions
  • What approach to value/cost was used
  • Complete descriptions
  • Statements of condition
  • Provenance, including history of ownership, exhibitions and citations in literature
  • Results of tests done for identification or authentication
  • How value characteristics of the subject property compared with those of comparable properties
  • What markets were explored and how were they analyzed / Records of past sales of comparable property
  • A reconciliation of data and a final value conclusion

 Qualified Appraiser

As defined in the Pension Protection Act of 2006, a qualified appraiser is an individual who:

  • Has earned an appraisal designation from a recognized professional appraisal organization for demonstrated competency in valuing the type of property being appraised OR
  • Has met certain minimum education and experience requirements or completed college or professional level coursework relevant to the property being valued, and must have at least 2 years of experience in the business of buying, selling, or appraising such property
  • Regularly prepares appraisals for which he or she is paid
  • States they are qualified to make these type of appraisals

Excluded individuals include:

  • The donor of the property, or the taxpayer who claims the deduction
  • The donee (recipient) of the property
  • A party to the transaction by which the donor acquired the property
  • Usually a party to the transaction will not qualify to sign the Certification of Appraiser section. But, a person who sold, exchanged, or gave the property to the donor may sign the certification if the property is donated within two months of the date the donor acquired it and the property’s appraised value does not exceed its acquisition price
  • Any person employed by, married to, or related to any of the above-named persons, or anyone whose relationship to any of those involved in the donation would cause a reasonable person to question the independence of the appraiser. Part III (Section B) of IRS Form 8283 lists persons who cannot be qualified appraisers
  • An appraiser who appraises regularly for any person listed above and who does not perform a majority of his or her appraisals made during his or her tax year for other persons
  • Understands that an intentionally false overstatement of the value of property may subject him or her to the penalty for aiding and abetting an understatement of tax liability. The donor may be liable for a penalty for overstating the value of donated property

We hope this information is helpful in assisting you understand the appraisal industry standards and the importance of securing a qualified appraiser.

Kelly Knoll, ISA CAPP – President/CEO of Heritage Appraisals
International Society of Appraisers – Certified Personal Property Appraiser