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Protecting Valuable Collections

By Sean Donahue

Knowing the true value of your art, antiques, or other personal collections is essential to protect that asset.

If you love art, antiques, fine wine, or other specialty items, you can spend years assembling a large collection of your favorite items. But what seems like a simple expression of your passion might also be a significant financial asset.

Unfortunately, many collectors don’t take the important step of documenting and appraising the valuable items in their home. “Some collectors are quick to spend a lot of money on a painting, but are reluctant to spend a few hundred dollars to get that painting appraised,” says Barbara Rusoff, director of client services at New York Fine Art Appraisers.

That’s a big mistake. If you don’t document and appraise your collection, you won’t be able to obtain proper insurance coverage and you won’t have a clear picture of that collection as a tangible asset that you can sell, borrow against or include in the legacy you intend to leave for your heirs.

The inventory and appraisal process

The first step towards protecting your collection is to hire an expert appraiser to record the value of each item you own. Even if you follow the market closely and think you know what your items are worth, insurers and the Internal Revenue Service won’t take your word for it.

“You cannot tell the insurance company that this is a $100,000 painting, or this is a $50,000 antique table,” says Rusoff. “They want that information in writing from an appraiser.”

Look for an appraiser that specializes in your type of collection—some appraisers are experts in specific types of fine art; others focus on antiques or jewelry. And always select an appraiser certified by an organization such as the American Society of Appraisers or the International Society of Appraisers.

The appraiser will visit your home and examine each piece in your collection, as well as review receipts, previous appraisals, and other documentation that helps to establish an item’s authenticity and value. Be sure to tell the appraiser how you intend to use his or her assessment. For insurance purposes, you want a retail-replacement value appraisal, which covers the total cost to replace an item, including taxes, shipping, and even some inflation coverage. A fair-market value appraisal is used for estate planning and tax purposes, or for non-cash charitable contributions. These values are typically lower than retail, because they don’t include the costs associated with immediately replacing a lost or damaged item.

Based on his or her research, your appraiser will write a complete appraisal report that lists each item and provides a detailed description of the piece, your history of ownership, and its value. The report may also include photos or video to help document those items.

Request at least two copies of the report—one to keep at home and one to keep at your office or in a safety deposit box. After all, you’ll need to easily recover that documentation in the event of a house fire or a natural disaster.

The inventory and appraisal report is required documentation if you want to properly insure your collection. Regular homeowners insurance policies provide only limited coverage for valuables such art or jewelry—typically about $1,500 to $2,000, according to the Insurance Information Institute.

If you have a collection that’s worth much more than that, you’ll need a floater policy to cover those items. Look for insurance companies that specialize in policies for fine art, antiques, jewelry, or other collectibles, and examine what risks are covered by their policies. You’ll want to protect your collection against fire, theft, water damage, and accidental loss or breakage.

Then, provide your appraisers’ report to insurers to get quotes on different levels of coverage for those items. Rates will vary depending on the type of collection and where you live, but floaters typically cost between $.30 and $2.00 per $100 of insurance coverage, per year.

Plan to update your appraisal every three years, or immediately after adding a significant new piece. Also keep tabs on major market changes, such as the death of an artist whose paintings you’ve been collecting, which might affect the value of your items. Once you’ve insured your collection and have the documentation to back up a potential claim, you’ll feel better knowing that the value of your items is protected.

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