An appraisal is a legal document presented to insurance companies in case of damage or theft, and is also essential in the process of settling an estate. All appraisals have a purpose and function. When a valuer begins the process of appraising an article of jewelry they must determine the reasons for the appraisal so they can take the best approach to estimate the value.
The purpose of an insurance appraisal is to establish the retail replacement value in the most common and appropriate markets. An insurance appraisal is done so the client can obtain specific scheduled insurance on an item. If you lose your jewelry, you have a document describing your item in exact and extensive detail - stone measurements, clarity, and color – quality and value of the item. The retail replacement value represents the cost to replace the described item with a comparable item, as near as possible to the original.
The purpose of an estate appraisal is to establish the Fair Market Value in the most common and appropriate jewelry markets. Fair Market Value is defined as the price at which property would change hands between a willing buyer and willing seller, not in a forced sale. Its function is to provide a basis for paying estate taxes. The specific information and data for the jewelry is listed, but does not include replacement pricing, and so this results in a lower value.
The purpose of a liquidation appraisal is to estimate an approximate selling price for the described item in a secondary market. This appraisal is an estimate of the possible cash value that an item is worth, in its current condition. Because this estimate is specific for a given market, the actual market in which an item is sold will determine the actual selling price.