Insuring Antiques: Why Experts Suggest Over-Insuring for Adequate Coverage

The Supply and Demand Dilemma

Antique experts often suggest insuring an item for more than its appraised value because the supply and demand for antiques is extremely low, making it difficult to sell an item for its full value within a specific period of time. While the appraisal value represents what a dealer would offer for the item at that moment, it is typically lower than what they could sell it for in the future. Dealers often set higher prices to wait for the right buyer to come along, which means that the item's true market value may be higher than its appraised value.

The Power of Auctions

Auction value, on the other hand, tends to be higher than appraisal value. The auction house is filled with people who specifically seek out antiques, increasing the chances of selling the item for a higher price. Additionally, the auction house's cut of the final sale price is often less than a dealer's markup, making it an attractive option for sellers. Thus, insuring an antique for its auction value can provide a more accurate reflection of its worth.

Insurance Value and the Broader Market

Insurance value represents the worth of the antique to a broker, considering how much the item would be valued at if it were placed in an antique shop and sold to the right buyer within 1-2 years. Insurance companies typically use the concept of replacement cost when insuring antiques. This means that they will pay out an amount that allows you to replace the item with a similar one of equal value. As a result, the insured amount for an antique may be higher compared to its retail value.

Factors Influencing Insurance Valuation

Insurance companies may require a professional appraisal of antiques to accurately determine their value. Appraisals for insurance purposes take into account factors such as rarity, provenance, condition, and current market value. These considerations often result in a higher valuation compared to retail prices. Moreover, the value of antiques can appreciate over time due to factors like inflation, changing market trends, or increased demand from collectors. Insurance values may reflect these potential increases, leading to a higher insured amount compared to retail prices.

Protection and Peace of Mind

Over-insuring an antique item provides a buffer for potential appreciation in value over time. Most people do not regularly track the value of their items and adjust their insurance accordingly. By over-insuring, owners can ensure that in the event of a loss, they can recover the full value of the item without being limited by the amount of insurance coverage. This approach also provides financial protection against unforeseen circumstances and allows owners to replace or repair their valuable items without facing financial strain.

Insuring antiques for more than their appraised value is a common practice recommended by experts. The low supply and demand for antiques make it challenging to sell an item for its full value within a specific timeframe. Auction value tends to be higher than appraisal value, and insurance value reflects the worth of the item to a broker. Factors such as rarity, provenance, condition, and market trends influence insurance valuation, which can result in a higher insured amount compared to retail prices. Over-insuring provides a practical approach to ensure adequate coverage, protect against potential appreciation in value, and offer financial peace of mind for antique owners.