Savvy collectors know the importance of art insurance coverage for protection of their art and antiques but most don’t know about the importance of insurance art appraisals. These appraisals usually come into the spotlight during moments of damage, fire, loss, or theft where the insurer carefully reviews it to determine whether or not they will compensate the client for the work and for how much (most insurers require coverage on items valued over $5,000). Collectors and art owners alike should take inventory of what they have in their homes, offices or storage facilities and update their art appraisals every 2 years.
If you have art or collect art, here are our top 4 reasons why you should consistently appraise your art and your insurance values:
1. DON’T GET STUCK WITH AN OLD APPRAISAL VALUE! Insurance companies only use the value of the last appraisal even if the value of your Warhol has increased 10 fold. The best time to update your appraisals is during volatile markets when there are rapid increases or decreases in values.
2. SAVE MONEY IN THE LONG RUN. Paying for a updated art appraisal can save you money on premiums for artworks that have decreased in value. Insurers adjust your premium only when you submit reevaluated appraisals.
3. OLD APPRAISAL VALUES MIGHT GET REJECTED. Even though insurance carriers consider the last appraisal submitted, they still may question and ultimately refuse to reimburse you for an artwork that was overvalued in an old appraisal (even if you have been paying a high premium based on the overvalued artwork).
4. BUILD A RELIABLE RECORD OF VALUE. If you are looking to donate your art to museums and you have maintained sales records and updated your appraisals consistently, the IRS is less likely to contest your Charitable Donation Appraisal if you’ve updated your insurance appraisals. They can serve as a strong basis for a future Charitable Donation appraisal and help build be a reliable record for establishing an artwork’s market value.
So as you can see, what might seem like an extra expense to update your insurance appraisals it can actually be worthwhile in the long run.
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