What a Valuation Letter Tells an Insurer

I write about six valuation letters a year for clients who need their antiques scheduled on insurance policies, and the process is more standardised than most people expect. Insurers are not looking for arguments about value; they are looking for structured information they can put in a file and refer to if there is a claim. Once you understand what they need, the whole process becomes routine.

The problem is that most people arrive at valuation with the wrong expectations. They expect the letter to be a certificate confirming a specific market price. In practice it is a technical document with a specific purpose, and the number in it is calculated differently depending on which type of valuation was asked for.

The three valuation types and when to use each

Three distinct valuation types serve different purposes, and using the wrong one is a common and expensive mistake.

Replacement value, sometimes called insurance value, is what you would need to spend to replace the item with an equivalent piece from a specialist dealer, at retail. This is the number your insurer wants. It is typically higher than auction value, sometimes considerably higher, because it reflects the cost of buying a comparable piece from someone whose job is to find them, rather than the price at which you might sell the same piece if you had all the time in the world.

Replacement value is what you should ask for when you are scheduling items on a home contents policy or a specialist antiques policy. Anything else undervalues your cover.

Fair market value, sometimes called probate value, is what the item would sell for in a normal market transaction between a willing buyer and a willing seller with reasonable time. This is typically the auction hammer price, not including buyer's premium. It is used for probate valuations, capital gains calculations, and some divorce settlements.

Fair market value is usually 40 to 60 percent lower than replacement value, sometimes more. If you insure at fair market value, you are underinsuring by that margin, and any claim will pay out at the lower figure.

Liquidation value is what you would receive if you had to sell the item quickly, typically at auction with no minimum reserve, in an unfavourable market. This is the lowest of the three values. It is used in some legal proceedings and in insolvency contexts.

Liquidation value is almost never appropriate for insurance purposes and should not appear on an insurance valuation letter.

What the letter needs to contain

Insurers are more or less consistent about what they require in a valuation letter, and any specialist writing valuations will follow this format:

Full description of the item, including maker (if known), date of manufacture (with source of the dating), materials, dimensions, and any distinctive features such as marks, inscriptions, or provenance.

Condition assessment, using specific language rather than vague terms. If a piece has damage or restoration, it must be described, because the valuation is calculated on the piece as it exists, not the piece as it might have been.

Photographs, typically three or four per item, showing overall views and any distinctive features or condition issues. Photographs should be dated and should be professionally taken or at least professionally lit.

Valuation type, stated explicitly. The letter should say "replacement value for insurance purposes" or similar, so there is no ambiguity about what the number represents.

Valuation amount, in the appropriate currency, with the date of valuation stated. Values change, and a valuation is only as good as its date.

Basis of valuation, meaning a short paragraph explaining how the value was arrived at. This might include auction records for comparable items, current dealer pricing, or specialist knowledge of the market.

Valuer's credentials, meaning who is signing the letter, what their qualifications are, and any professional body memberships. Insurers weight valuations from members of recognised professional bodies more heavily than valuations from unaffiliated valuers, and this can matter in a claim.

A properly formatted valuation letter runs to two or three pages per item plus photographs. If you receive something shorter than that, particularly a one-line certificate with just a number on it, ask for a more detailed document. Insurers may accept the shorter form but they may not, and finding out after a loss is not a good moment to discover the paperwork was inadequate.

How often to renew

Standard practice is to renew valuations every three to five years, and there are three reasons this matters.

First, markets move. The value of Staffordshire figures has been roughly flat for twenty years; the value of casino chips has doubled in five. If your valuation is ten years old and the market has moved, you are either underinsured or paying too much in premium.

Second, condition changes. Even a well-cared-for piece changes slightly over the years, and any restoration or repair carried out after the valuation was written affects the value.

Third, insurers periodically require fresh valuations as a policy condition. Some policies specify five-year renewals; some require them after any claim; some require them at the discretion of the insurer.

The cost of a fresh valuation is usually 1 to 2 percent of the value of the piece, or a fixed fee per item for lower-value work. For a collection, a valuer will usually charge a day rate rather than per-item pricing, which brings the cost per piece down substantially. Budget for this as a normal cost of ownership, not as an extra.

The advice that leads to underinsurance

Most standard advice tells people to insure their antiques based on what they paid for them. This is almost always wrong, and it is the single most common cause of underinsurance in this category.

What you paid for a piece reflects the market on the day you bought it, sometimes years or decades ago. It does not reflect current replacement cost, which is what your insurer will need to pay out if you have a total loss. A silver tea service that cost 800 pounds in 1995 is not worth 800 pounds now, and it might not cost 800 pounds to replace either, either because the price has risen or because comparable pieces have become harder to find.

The other trap is treating a whole collection as a single insured item. Standard home contents policies have a single-item limit, often around 1,500 pounds in the UK. Anything worth more than that limit needs to be scheduled separately as a specified item, with its own valuation. A collection of ten pieces each worth 3,000 pounds needs ten separate valuations, not a single aggregate figure of 30,000 pounds. Aggregate values do not survive a loss where only some items are affected.

For related pieces, see how light and humidity damage antique paper, how to date sterling silver, and the Care and Preservation category. If you are only just starting out, the auction mistakes piece is worth reading first.