What is an Appraisal?

An appraisal is a document that describes an item, assesses its relative quality and assigns a value to it. Descriptions usually cover the visible, measurable and analyzable facts about the item (weight, materials, markings). Most appraisals also describe subjective features such as gemstone quality, relative rarity and overall quality of manufacture.

There are many reasons why someone might need an appraisal. These include insurance documents, point of sale documents, donation appraisals, and estate appraisals. These all serve different functions, so be sure to request the proper documentation for the specific job.

Types of Appraisals

An INSURANCE APPRAISAL is required when an item of jewelry is to be scheduled separately on an insurance policy. Standard coverage might include some aggregate allowance for jewelry. However, these limits are generally low and may not cover all perils. A separate insurance rider on any single item of jewelry will generally cover perils including theft, loss, mysterious disappearance, fire, etc. You should refer to the actual policy for explanation of coverage.

An insurance appraisal is done so the client can obtain specific scheduled insurance on an item. The most common insurance appraisal is a replacement type policy. Basically, this policy protects for most perils and allows for the item to be replaced with a similar item of jewelry. Another type of coverage is the agreed value policy where the settlement is for cash and not for replacement of the jewelry. Generally, these policies would carry a higher premium. All insurance matters should be discussed with your agent to determine what coverage will best serve your particular needs.

A POINT OF SALE DOCUMENT is similar to an insurance document in that a retail value is provided so that the client can purchase insurance. However, this document may be provided by the actual seller of the item of jewelry and it will report the actual selling price. In this type of appraisal, the seller is disclosing his/her role in the transaction. This type of document is valid and is usually acceptable for obtaining insurance.

When an item of jewelry is being donated to any charitable organization, an appraisal may be required. The value to be used for tax reporting is most commonly the fair market value. This is defined as the price that a willing buyer and willing seller would agree upon.

An example of fair market value might be the price that an item sells for at a local auction. Rarely is this price a full retail price. Depending on the condition of the item and the desirability of the item, the fair market value might be as low as “scrap” value or rarely, as high as retail value.

If planning a donation or estate contact the IRS via their website www.irs.gov for more information regarding appraisal expectations.

Call me today to discuss which type of appraisal is right for your unique situation. 510-225-5054