Insurance Replacement Cost Appraisals
In 3 Easy Steps

by Michael Ivankovich, GPPA, MPPA

What would happen if something you cherished was lost, damaged, destroyed or stolen? If you have an all-inclusive HO-3 Home Owners Insurance Policy issued by a reputable Insurance Company, you're covered for your loss, right?

Not so fast. Most Home Owner's Insurance HO-3 Policies are generally "all-inclusive" which means that you are covered for all types of loss...unless they are specifically excluded in your policy. And most HO-3 Policies are very similar in that they limit the amount of loss you can claim for certain items such as:

• Cash
• Sterling and other Fine Silverware
• Art (including Oils; Watercolors, Pastels, Prints, etc.)
• Antiques, Collectibles, and Collections
• Jewelry (including Furs, Watches, etc.)
• Coins & Stamps
• Cameras, Computers, or Electronics
• Firearms
• Home Office Business Property (Computers, Accessories, Desks etc.)
• And More.

Perhaps your loss was caused by a minor accident. Or possibly it was caused by something more significant such as a fire, wind, storm, or hurricane. What if someone accidentally breaks a valuable item? What if your home was burglarized?

It doesn't matter. Even if your lost valuable is worth $50,000 or more, you will not be covered for more than your policy's allowed maximum...which is typically limited to $1,000-$2,500. Unless you have a "Rider" attached to your policy which specifically insures your valuables. Sometimes called a personal property "Endorsement", "Schedule" or "Floater", whatever the name, each serves as a mini-Insurance Policy which provides additional coverage for your itemized valuables that are not covered by your basic HO-3 policy. And often this coverage is surprisingly inexpensive (only a few dollars/$1000 of coverage) because the coverage is so specific, and often there isn't even a deductable.

The process of adding a "Rider" to your existing Insurance Policy is as simple as 1-2-3:

1. Review Your HO-3 Policy with your Insurance Agent: First clarify what is and is not covered by your policy. Discuss what you would be covered for in the event of loss, and then analyze the amount of coverage you actually need. A good Insurance Agent can easily lead you through this.
2. Obtain an Insurance Replacement Cost Appraisal: Your Insurance Company wonft let you insure your valuables for more than they are worth because the temptation for fraud would be too great. You will need a written appraisal, completed by a professional, qualified and unbiased Personal Property Insurance Appraiser, to analyze and describe your valuables, and then assign an appraised value to each item. If the appraised value is too low, youfll be gunder-insuredh. If itfs too high, youfll be paying too much.
3. Home Office Review & Rating: Once the Insurance Appraisal is done your agent will submit it to the Insurance Companyfs Home Office for review and approval. Once approved, just pay your premium on-time and you will have the additional piece of mind knowing that your valuables are properly covered.

How Does The Insurance Appraisal Process Work?

The objective of your HO-3 Home Ownerfs Policy and any attached Riders is to restore you to your pre-loss position...quickly, easily, & painlessly...should any of your personal property be lost, damaged, destroyed, or stolen.

"Insurance Replacement Cost" is defined as: The highest price in terms of cash or other precisely revealed terms that would be required to replace property with another of similar age, quality, origin, appearance, provenance and condition, within a reasonable length of time, in an appropriate market.

Let's look at the four components of this definition:

• Highest price: Your Insurance Appraiser will research the highest reasonable amount it will cost you to replace your loss, and your objective should be to insure your valuables at a retail and not a wholesale price.
• Similar age, quality, origin, appearance, provenance and condition: Rarely will you find the exact replacement for your lost antiques, collectibles, jewelry, art, etc. The objective here is to replace your item(s) with something "comparable", not something "exact".
• Within a reasonable length of time: When you suffer an Insurance loss, your objective should be to restore yourself to your pre-loss position quickly, and the fastest way to do this is to make a retail purchase, not shop around for a wholesale bargain.
• In an appropriate market: If you bought your valuables at a fine Jewelry Store, that's probably where you should go for a replacement; if it came from a Flea Market, that would be the most "appropriate" market for you.
  

What To Look For In A Good Insurance Replacement Cost Appraisal: When you need a Personal Property Insurance Appraisal, you should seek out the best and most knowledgeable Appraiser for what you need appraised, recognizing that different Appraisers have different specialties. But all Insurance Replacement Cost Appraisals should include the following:

• Description: An expert physical description of each item including rarity, size, age, condition, and anything else of importance.
• Photographs: To prove evidence of existence and pre-loss condition.
• Value: The current Insurance Replacement Cost Value.
• Back-Up Copy: And your Appraiser should retain a copy of your appraisal for at least 5 years, in the event yours should be lost or misplaced.
  

How To Keep Insurance Costs Under Control: If you are concerned about the cost of adding a Rider, here are several ideas to help you keep the cost down.

• Insure Only Important Items. Set a value limit, perhaps insuring only things valued at $200 each or more, while "Self Insuring" the smaller items.
• Use Realistic Replacement Cost Values. Some Appraisers will provide you with inflated values which make you feel good about what you own, but cost you more than necessary in premiums.
• Keep Your Appraisal Current: Recognize changing value trends. Your gold & silver jewelry and decorative accessories should be valued higher today because of the higher price of gold & silver. If your Art was last appraised in the 1980's, it's probably under-insured today. Yet many of your Antiques & Collectibles have probably dropped in value since the 1990's. You should renew your appraisals every 5 years in order to stay on top of changing value trends.

How To Keep Appraisal Costs Under Control: If your Appraiser tries to charge a fee equal to a percentage of appraised value, find another Appraiser. That approach only leads to inflated values. And it's unethical. Most Appraisers will charge you a flat fee based upon either an hourly fee, or the scope of the job. Recognize that the easier you make it for your Appraiser, the lower your appraisal fee will be.

• Take The Items To Your Appraiser. When practical, take items to the Appraiser rather than having them come to your home. This will reduce the appraiser's travel time.
• Only Appraise Items Over a Specific Amount. Perhaps $200 or more. It takes just as long to appraise a $5 item as it does a $200 item and costs can mount fairly quickly if you opt to appraise each $5 teacup and saucer that you own.
• Have Everything Opened and Ready to Be Appraised. Be prepared. If the Appraiser is standing around watching you open boxes and unpack china and glass, youfre just throwing away money. Do that before the Appraiser arrives.

In summary, don't assume that your valuables are covered by your HO-3 Homeowners Insurance Policy. Check with your agent to be sure and, where appropriate, obtain an Insurance Replacement Cost Appraisal, by a professional Insurance Appraiser, and add the appropriate Rider(s) to completely cover your most cherished possessions.

Michael Ivankovich is a Professional Personal Property Insurance Appraiser based in Doylestown, Bucks County, PA. He is a GPPA (Graduate Personal Property Appraiser), an MPPA (Master Personal Property Appraiser), and is USPAP-certified. He is a licensed and bonded Pennsylvania Auctioneer with 20+ years Auction experience, has been named Pennsylvania's Auctioneer of the Year by the Pennsylvania Auctioneers Association, and has 35+ years experience in the Antiques & Collectibles field.

Several of his specialty areas include Insurance and Divorce Appraisals, as well as Appraisals of Art, Furniture, Estates, Household & Residential Contents, and much more.

You are invited to visit his web site at http://www.michaelivankovichappraisals.com And you can reach Mr. Ivankovich at (215)-264-4304 or by email: [email protected]