Insurance Coverage Appraisals: When & 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