- Jan 14, 2003
Should I insure the ring for the appraised value which would cost me $779 or for the purchase price which would cost me $646?
The key is to be sure you understand what question the appraiser is answering in their report. There are quite a few choices that will result in different valuations. The one that is of interest to the insurance company is “What is an appropriate funding to replace this item with another of like kind and quality in the case of a loss?” This is not the same as “What would Tiffany’s charge for a ring that looks sort of like this one?” and it will probably have a considerably different answer (unless Tif’s made the ring). Insurance companies usually replace in the local marketplace, which may not be where you bought and this can sometimes result in a difference. There is very little merit to insuring for more than it will cost to replace because it increases your premiums and you get nothing in return. Since you are trying to predict future values, it is often prudent to include a small buffer for possible inflation. On the other hand, if you bought at less than the replacement cost, you should be able to retain the benefit of your good bargain.
To answer your question, I agree with mike04456, use the appraisal if it’s been reasonably prepared. I would expand that. If the appraisal isn’t reasonably prepared, get one that is. It can save you an enormous amount of grief at the claims end if you have complete and accurate documentation up front. While you’re at it, check out the insurance on your home and other property, the same rules usually apply. A little bit of work up front will serve you well.