Only Original Art Appraisal Process

A Guide for Investing Resource

Fine art has a unique quality that requires handling that’s quite different from any other asset.
It is meant to be appreciated for its aesthetic quality more than it is meant to be used. Experiencing it is something that is deeply personal but at the same time, can promote connection with others through common emotions. Even though it is primarily thought of as a luxury, it is still a necessity, and an investable asset.
Protecting your fine art is best met through a careful assessment, proper documentation, and proper insurance. This is accomplished by asking the right questions regarding your insurance coverage and understanding the importance of an appraisal.

How is your personal property and artwork covered by most Homeowners policies?
Most All-Risk HO policies provide blanket coverage for your personal property. In the event of any covered loss, a deductible will be applied. How these claims are paid will depend on if your personal property is covered for “Replacement Cost” or by “Actual Cash Value.” In the event of a total loss of an insured item, “Replacement Cost” coverage will replace the item with a new one of equal or like quality, while “Actual Cash Value” coverage will provide the insured a cash payment equal to the item’s depreciated value at the time of the loss.

There is usually a separate limit of coverage for certain types of personal property. Namely, collectibles such as fine art, currency, coins, stamps, and jewelry varying from $500 to $5,000 — depending on the individual policy. This is because your HO policy is designed to insure your home, not protect your jewelry and art collection.

These same valuable items (jewelry and art) are handled differently than the rest of your personal property when it comes to damage, theft, or mysterious disappearance. The amount of money paid to the insured in the event of this type of loss is capped depending on the category. For instance, the amount of money paid to the insured for the theft of one or more artworks that have a total combined value of $20,000 could be as little as $500 depending on the policy. These are items that the insurance companies want you to schedule separately under a personal Inland Marine Policy, sometimes called a “floater”, “rider”, or “endorsement.” In this type of policy, individual items and their values are listed; the coverage is broader; and the coverage is usually less expensive than blanket coverage.

How does the Inland Marine Policy protect your fine art?
To protect an insured’s property that is not covered by the standard HO policy, companies normally offer the option of a personal Inland Marine Policy. Attached to this policy is a list provided by the insured of all the property that exceeds the limits of their homeowner’s policy that they want insured and the value they want each item insured for. This type of policy will normally have fewer restrictions than a HO policy and provide more in-depth coverage. If an item on the schedule is lost to an unexcluded risk, the insured will receive the amount of money specified as the items listed value, unless a deductible applies. If the item is damaged and not total loss, the policy will normally pay for its restoration up to its listed value.

This scheduled personal property insurance is always an “All Risk” policy. This means that it will cover against all risk of physical loss or damage to your property described in the schedule of personal articles, unless an exclusion applies. For each item covered, you will normally have to provide your agent with an inventory of the items, photographs, a copy of the original purchase receipts, or a current appraisal. A good appraisal written by a qualified appraiser will include a complete inventory along with photographs and current values. As a rule of thumb, if you have any fine art valued at $2,500 or more, the best way to ensure that they are properly covered is to have them itemized, appraised, and listed separately on a personal Inland Marine Policy.

The Fine Art Appraisal Report:
When works of art are appraised by a professional appraiser, they evaluate several factors to determine the artwork’s value, including the artist’s reputation, the artwork’s rarity and historical significance, its condition, and the current market demand for similar artworks.
Based on this evaluation, the appraiser assigns a value to the artwork, which represents its market value at the time of the appraisal.
For buyers who view art as an investment, the information expressed in the appraisal report can indicate an artwork’s potential value to appreciate over time. As a result, buyers may be willing to pay more for similar works, based on the belief that its value will continue to increase in the future.

What is an appraisal?
An appraisal is a thoroughly researched and well-supported opinion of value by an impartial professional with specialized knowledge and expertise in the art world. Appraisers are trained to evaluate the quality, condition, rarity, and historical significance of an artwork. Their opinion can be expressed as a specific amount, a range of values, or in relation to a previous value.
Why is it important to get your art appraised?
Art appraisals are important for many reasons. Here are 6 important reasons to get an art appraisal:
2. To get a professional opinion: An art appraisal will give you a professional opinion on the value of your artwork. This can be helpful in making decisions about buying or selling artwork.
3. To find out more about your artwork: An art appraisal can tell you more about your artwork, such as its history, provenance, and condition. This information can be helpful in making decisions about how to care for your artwork.
4. To ensure that your artwork is properly insured: An art appraisal will help you make sure that your artwork is properly insured. This is important in case of damage or theft.
5. To avoid disputes: An art appraisal can help avoid disputes between buyers and sellers, or between family members in the case of an estate. A professional appraisal can provide an objective opinion on the value of artwork.
6. It should be updated approximately every 5 years to reflect fluctuations in the market.

Choosing a qualified appraiser:
An appraisal report can only be written by those who hold themselves out to the public as professional appraisers. That means they have the necessary qualifications to appraise specific items, they are unbiased and impartial, and their reports are compliant with the Uniform Standards of Professional Appraisal Practice (USPAP). There are several methods they use to determine value, including:
Artist Research:
Appraisers will research the artist’s reputation, significance, and style to the determine the value of the artwork. They will also consider the artist’s place in the art world, their exhibition history, and any awards or critical acclaim they have received.
Comparative Sales Analysis:
Appraisers will look at recent sales of comparable artworks to determine the market value of the art work being appraised. This involves researching recent sales of similar artworks by the same artist or of similar style, medium, or historical significance.
Condition Evaluation:
Appraisers will also evaluate the condition of the artwork to determine any damage or wear that may affect its value.
Market Analysis:
Appraisers will also consider the current market conditions, such as demand and availability, to determine the value of the artwork.

Provenance Research:
Appraisers will also research the artwork’s history of ownership, or provenance, to determine its value. They will look for any prestigious or notable previous owners, such as museums or private collections, and consider how the artwork has been documented and cared for over time.
The process for getting your items appraised: Once you have chosen your appraiser, they will need the following information to begin the appraisal process:
1. The purpose of the appraisal (i.e., insurance purposes, divorce, charitable contributions, etc)
2. The intended users (i.e., insurance companies/agents, accountants, attorneys, etc.)
3. Provide as much detail as possible about the subject property including any supporting documentation you have (i.e., past appraisals, old receipts, invoices, provenance, etc.)

The appraiser will inspect the items and determine their condition. While it is preferred that this is done in person, in rare occasions this can be done virtually via emailed images, and even zoom and other video chats. Then they will complete their research and produce the report delivered through the mail or in person.

Cost of an Appraisal:
Appraisers usually charge by the hour, at a per article rate, or a flat fee agreed upon by the appraiser and client. The cost varies based on several criteria including the appraiser’s level of expertise, their geographic location, and the amount of time estimated to complete the report. Most charge between $100/hour and $400/hour. A good appraiser will always confirm the costs with you before the process begins.

Final Thoughts:
No matter how or why you have acquired your fine art and other valuables, it all has value that needs to be protected in the event of a covered loss. It is worth it to consider getting an appraisal to appreciate its most current value and to protect your investment. If you need additional information please contact our preferred appraiser, Leiza McKenna of Leiza McKenna Appraisals LLC, leizamckenna@gmail.com

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