Fine-Art Insurance valuations aren’t so complicated, as some may think. Here is the breakdown. The IRS defines fair market value as the price that property would sell for on the open market, as agreed upon between a willing buyer and a willing seller, with neither being required to act and both having a reasonable knowledge of the relevant facts.

Usually, this means the auction market (buyer’s premium included), because auction is the predominant market of open exchange. If the property in question sells predominantly or exclusively at retail (i.e. in a gallery), however, retail is the market used by the appraiser. All IRS appraisals are fair market value appraisals.

Insurance appraisals have a different criterion for valuation. Here the assumption is that the insured item needs to be replaced in a timely manner. Waiting for a similar item to come up for auction could be unreasonable and impractical. So instead of a valuation based on the auction market, retail replacement is the most appropriate valuation.

This is the price that one would expect to pay for the same or similar item in a retail setting at the present time. Oftentimes the insurance value is even a bit higher than retail to accommodate for shipping and other costs related to the purchase.

Also, check out our informative article on Schedule VS. Blanket Coverage for an in-depth look at how policies are written in terms of valuation.

As a knowledgeable Art Insurance broker, I can guide you through the process of navigating the often confusing insurance industry and properly protecting your Art. Give us a call at 800.921.1008 or Live Chat with us at www.ArtInsuranceNow.com you can even get a free quote by following the link below.