Types of Jewellery Appraisals

The value of an item of jewellery depends on the purpose of the evaluation. It’s the same as your car. If you sell it, the value is most likely lower than the cost of replacing it new. The first value would be the Fair Market Value and the second would be the Replacement Value.

Here are two popular types of jewellery appraisals:

Insurance Appraisals

An insurance appraisal is a complete description of an item of jewellery, supporting an estimate of the value, to be used as the basis for establishing the coverage and cost of an insurance policy. It establishes the upper limit of insurance coverage for an item of jewellery, and is based on that item’s most common source for replacement. This is called the replacement value. For example, if an item is an antique cameo brooch, the value of that item will be established by researching the costs of similar items at auction, antique stores, or estate sales, rather than a retail jewellery store. This is because a retail jewellery store would not be the most common source for an antique cameo brooch.

When an item is sold by brand name and is clearly identified by way of markings, the appraisal value is the cost to replace the item with the same brand. If the branded item is no longer available, a comparable value will be used.

Important

Check with your insurance company. Without a jewellery appraisal, most home policies may offer a minimal level of insurance coverage in the event of theft. It is normally required that you to submit a jewellery appraisal to receive proper and full coverage for all risks. Without the appraisal, you may be subject to a limit of coverage and often have to pay a deductible in the event of a claim. Deductibles are normally between $500 and $1000. Your broker or agent would be able to help answer questions regarding your coverage and make good suggestions to help you insure your jewellery in the best possible way. I like to think:
[blockquote]Insurance premiums are expensive before a loss and really inexpensive after one.[/blockquote]

Estate Appraisals for Probate

When a person passes away, their property (including jewellery) is described and evaluated for probate. In the case of assets like jewellery, the Fair Market Value, rather than the Replacement Value is used. This is the value that the item would sell for in an open market. Even if the jewellery is not for sale, the Ontario government requires an estimated value of the jewellery as though it was sold one minute before the time of death. It is advised that you have a professional jewellery appraiser prepare the estimated value because the government has the right to question any estimate for several years after the time of death. As the Executor of the will, you are responsible for proving the value of the jewellery and other assets were honest and legitimate.

Fair Market Value Definition

The price that a given property or asset would fetch in the marketplace, subject to the following conditions:

  1. The buyer and seller have reasonably knowledge about the item for sale; they are behaving in their own best interests and are free of undue pressure to trade.
  2. A reasonable time period is given for the transaction to be completed. Given these conditions, an asset’s fair market value should represent an accurate valuation or assessment of its worth.

Comparisons are made to estate auctions, antique store selling prices, and the second hand market of Ebay and other online sources. These are places where you would find similar items for sale. The Fair Market Value of an article of jewellery is often a small portion of the cost to replace it with a comparable item in new condition. Exceptions are very collectible or rare items in high demand.

Appraisals While You Wait

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