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The Differences between Auction and Insurance Valuations

As a firm of auctioneers and valuers, Grand Auctions deals mainly with two types of valuation. Auction valuations and insurance valuations. These two types of valuation can result in two wildly different values. One morning last week we had a client who wished to know the value of their diamond engagement ring. The ring was very attractive. It featured a round brilliant cut diamond of approximately 1.50 carats. The colour was good, around G or H on the Gemmological Institute of America’s colour grading scale. The clarity was also not bad. Around SI (slightly included) on the GIA clarity grading scale. The setting was pretty standard but the ring was very commercial and very saleable.

Auction estimates explained

After checking some recent auction results, I valued the ring for auction at between £2,000 and £3,000. Hopefully the ring would make more than that, but an auction valuation is only really a guide to where bidding should start rather than an actual real value. It turned out that the owner didn’t want to sell the ring anyway (unfortunately!), only insure it. I explained that an auction valuation was very different to an insurance valuation. An insurance value would reflect how much it would cost to go out and replace as closely as possible the item being valued. If this meant buying at retail, then one had to factor in all those extra costs that retail prices encompass. Shop rent, staff wages, VAT, not forgetting any mark ups.  A ring such as the one belonging to our client could easily command a price tag of upwards of £5,000 in the window of a high street jewellers.

What's in an insurance valuation?

It turned out that our client had paid even more than that. After a detailed analysis of the ring and in particular the diamond, we supplied the client with an insurance valuation document to the value of £6,250. This included detailed measurements of the ring, full carat, colour, clarity and cut gradings for the diamond itself, plus a set of digital macro images of the piece. We would keep the details of the ring on file and, for a small additional charge, be able to update that valuation in the future if necessary.

Differences in valuations

In the end our client was very happy with the information they received. But the case highlighted the difference between auction and insurance valuations and the potential pitfalls when dealing with people who don’t necessarily appreciate the differences between the two. I don’t mean that in a condescending way, but just to say that an item’s value is directly connected to the context.

To find out more about the valuation services we offer, visit our Insurance and Probate page. To contact us, click here.