What is an insurance appraisal? An appraisal is a document used for insurance purposes that provides an estimate of value for the purpose of replacing or repairing an item in the event of future insured losses.

#1 MYTH: The insurance replacement value given on the appraisal is the most important part of the document. FALSE!

TRUTH: The description of the appraised item is the most important part of the document.

Why? Any claim you are going to make will happen on a future date. Therefore, the value of the item on the day the appraisal was done is not as important as the value of the item on the day the loss/damage occurs. This is why the full description of the item is a key component to any appraisal. See Important Aspects of an Appraisal by Jeanne Johnson, J. L. Johnson Fine Jewellery Appraisals, for further info. This also highlights the need for updated appraisals to help cover the future changes in value.

#2 MYTH: Insurance companies force people to insure to a higher value than the sale price for the purpose of making a profit.

TRUTH: There are three responsible parties (purchaser, appraiser and insurer) who contribute to appraised values

  • The purchaser is responsible for choosing where they buy their jewellery or fine art and for how much
  • If a piece is newly purchased, the purchase price will reflect the insured value because that is the cost to replace at that point in time
  • If a piece was bought 2+ years ago, there is a larger difference between the original price paid and the value to replace today
  • Appraisals for insurance are based on asking: What is the highest price expected to replace this item at a future time with another of like kind and quality at an unspecified local specialty jewelry store NOT

What is the lowest price I can reasonable expect to pay for this item if I received a discount or had a friend sell me a new piece?

  • The purchaser chooses which jeweller /gallery owner or independent appraiser will conduct the appraisal
  • The appraiser is responsible for providing the appraisal, including description and estimate of value
  • Inflation could possibly occur if an appraisal is used as a selling tool, where the appraised value is purposely higher than the sale value
  • Insurance companies ask for premiums based on the values given in the appraisal and any applicable taxes
  • If an appraisal document is out of date or inflated, the purchaser could be paying too little or too much on insurance premiums

#3 MYTH: My insurance policy will always pay out the full value of my piece, not matter what.

TRUTH: The value paid from any insurance claim will depend on multiple factors:

  • Whether it is a full replacement of a piece of jewellery/art or a repair/restoration 

Why? If your piece is a complete loss, the policy will pay for a new piece. If your piece needs repair, the policy will only pay for the cost of the repair and any loss in value if applicable.

  • When appraisal was last done

Why? If you just bought the piece, the purchase price is the replacement value of the item at that time. If you have owned the item(s) for many years and haven’t updated the appraisals within the last 3 years, the estimated replacement of your items are severely out of date.

This means you are likely paying too much (your items have depreciated in value) or too little (your items have appreciated in value) in insurance premiums and may not be able to replace your jewellery for the amount reflected in your policy.

Yes – High value assets can sometimes depreciate in value over time!

  • Market fluctuations at the time of loss

Why? Precious metal, diamond sand precious stones are commodities whose prices fluctuate and as such, the value of your items can change over time. The art market, despite full transparency, is used by insurers for the strength of an artwork’s value at the time of loss.

Other reasons to appraise your art and/or jewellery collection: Proof of ownership and use in catalogue

Proof of Ownership – Appraisals provide dated documentation which supports your ownership of any one piece at that point in time.

Use in catalogue – The activity of documenting your collection has become an art in and of itself. Collection Management Systems have been created for collectors to track, count, monitor total values and keep record of an entire collection of items. Appraisals support these management systems (whether computer versus web-based or otherwise) for the details of any one item. 

How do I go about appraising my collection? Some options to consider

Geographically – Categorize your items by location and appraise each location at one time

Top 20 pieces – Identify your most valued items (via purchase price, sentimental value or otherwise) and appraise

Based on budget – Speak to a professional appraiser about your budget to determine which items to appraise

Timeframe – Define when you want to start and/or complete the appraisal process based on factors such as travel, etc