Antiques - The old will become new again

If you own antiques you will want to consider their present value in relation to what the insurance company will pay if they are lost or damaged.

Let's say you have an antique oak dinning table and chairs that is worth $10,000 because it is old and was made by a certain craftsman.  It is lost in a fire

Replacement Cost
Most policies insure for replacement cost.   In the policy "Replacement Cost" means the cost (at the time of loss) to repair or replace (whichever is less).   We are assuming that the item can not be repaired for this example.

The insurance company will replace the table and chairs with a new table and chairs of like kind and quality.  This does not mean that they will find you another table and chairs made by the same person at the same time in history.  They will pay for a "new" dinning table and chairs made of oak similar in kind and quality. For our example let's assume that amount is $3000.   The insurance company will provide you with the $3000.  You will not be getting the $10,000 market value for the table and chairs, unless............... you have these items appraised and insured as an antique with a stated amount of insurance of $10,000. 

If you don't replace with a "new" table and chairs
The alternative settlement if one does not wish to replace the item damaged is "Actual Cash Value".   In the policy "Actual Cash Value" will take into account such things as the cost of replacement less any depreciation, and in determining depreciation the insurance company will consider the condition immediately before the damage, the resale value, and the normal life expectancy.

Actual Cash Value is not Market Value
Most people associate "Actual Cash Value" to mean market value.  It is not the case at all.  To determine the actual cash value you first begin with the replacement value and take depreciation (or what some refer to as wear and tear). Your table is old so the depreciation may be as high as 50%. This means the table after allowance for depreciation is worth about $1500 to $2100 depending on the condition immediately prior to the loss.   If you except the actual cash value amount you do not have to replace the item.

In the end, if you replace the table with a newly constructed table and chairs for $3000 the insurance company will pay $3000.  If you do not replace the table they will offer you $2100.  Although the isurance company may agree to pay $3000 due the fact that the market value was far greater than the replacment value.  But this would by no means be a guarantee.   The adjustor may recommend that the company pay the $3000 immediately without proof of replacement.  

An Alternative

The alternative is to have the table and chairs appraised.   This establishes the "market value" at $10,000.   The insurance company will now decide if they  will insure the table for $10,000 or not.  If they do agree to do so they will charge an additional premium and list the item on the policy.   When a loss occurs to the item you receive the $10,000.  You are not required to replace it. 

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