Thanks to global inflation, just about everything is more expensive today. While we tend to think about inflation for future purchases, it’s important to remember that higher prices may be affecting the value of things we already own and that current insurance policies on items such as classic cars, expensive cameras, art, or jewelry may not be enough to cover them should they need to be repaired or replaced.
Do I Need More Than Homeowner’s Insurance?
While it’s true that standard homeowners’ insurance policies cover things like jewelry or collectibles, that coverage can fall short of fully covering high-value items. Standard home insurance policy limits coverage to $1,500 for theft of jewelry, watches, furs, and precious and semi-precious stones. For this reason, many people choose to fill the gap with policies that will cover the full replacement cost of expensive items. To do so, homeowners must typically submit the items for an appraisal to determine their value and what type of policy will cover them.
This type of insurance is often referred to as “a floater” policy. It’s essentially insurance that’s broader than a standard homeowners policy. And unlike homeowner’s insurance, a floater policy will cover accidental loss — such as dropping a diamond earring down a sink or leaving a valuable item in a hotel room.
Even If Your Valuables Are Already Insured, It May Not Be Enough
But what happens if it’s been a long time since you had an appraisal on these items? In short, an updated appraisal might be needed if the value of the item has increased. For classic cars in particular, global parts shortages could significantly add to the costs of repair or replacement, and labor costs have skyrocketed in recent years.
An appraisal is a statement of an item’s value made by a professional. It’s a necessary service to seek out as it is the basis for the needed documentation to establish the existence, condition, and value of your items. The appraisal is used when you wish to sell or donate a collectible item, to help settle an estate, or if the item is lost or damaged. The appraisal also helps you ensure your valuable items are insured to their current replacement value, which provides protection against market fluctuations and value loss.
The Difference Between FMV and RV
There are two figures that are important when it comes to appraisals on valuables. Fair Market Value is the price at which property would change hands between a willing buyer and a willing seller if neither felt like they had to buy or to sell and both have reasonable knowledge of relevant facts. This value is often used for IRS appraisals or if you want to sell the item. Replacement Value is most often used for insurance on valuable items. It is the amount that would be required if you needed to replace the item with another of similar age, quality, origin, appearance, provenance, and condition in today’s market. Replacement value includes any fees, taxes and services that would be involved in replacing the item. For this reason, replacement value is usually higher than fair market value.
In short, now is a good time to make an inventory of your household valuables and determine if any of them need additional coverage. Even if you already have coverage, a new estimate and adjustment to the policy is likely in order.
Talk to an Insurance Agent
To make sure you have the right coverage for your valuables, contact an independent insurance agent who can help you put a policy in place that protects you from loss. In Connecticut, Petruzelo Insurance offers personal and business policies that fit your needs and protect your home and business. Call us at 866-479-3327 or visit our website for more information.