What Is Fair Market Value?

If you have total loss of one of your guns, many types of insurance policy will reimburse you up to the item’s fair market value. In this case, the term “fair market value” actually has a pretty specific meaning that can be important for insurance policyholders to know.

This blog answers key questions about this tricky term, including what fair market value means, how to determine the fair market value of your guns and how you can properly protect your firearm property’s fair market value. Here’s what to know.

In the business world, fair market value is defined as the price an asset would sell for in the current market and where the following conditions are all met:

Both the buyer and seller are seeking the best possible price.
Each party is acting in their own best interest.
They each have access to relevant information about the item being sold.
There’s adequate time to complete the transaction.
Neither party is under any unusual pressure to buy or sell.

Imagine that a buyer and seller are meeting to discuss a potential deal and that all of these conditions apply to the transaction. The price they agree on? That would be the fair market value.

Fair Market Value in Insurance

Lots of insurance companies use fair market value as a basis for underwriting policies, determining financial loss amounts and paying out claims to insurance customers. Though the term may be something you don’t hear about a lot, most people actually have quite a bit of experience transacting property with a fair market value.

Think about the last time you bought or sold a home or a used car. While the price originally paid for it when it was brand new may be the in back of your mind, you’re much more concerned with what it’s worth at the time of sale.

Sometimes that number goes up, sometimes it goes down. It depends on your location and time of year, how many people would like to buy that particular thing and how many are available for sale at the time, whether it’s in good or not-so-good condition and many other factors.

Fair Market Value for Firearms

In general, the fair market value of firearms and their accessories works much the same way. A brand new item may sell for a certain price. Afterwards, the fair market value typically falls to a level 15–25% below that original price. Many items will then hold that value for a number of years. After several decades, values on these older firearms tend to begin going back up again.

However, the fair market value of some items has a less common trajectory. If a particular gun is a classic, rare, limited edition or out of production, its fair market value may remain similar to the price you paid for it, or even go up. That’s especially true if lots of people want one and there aren’t many to go around.

Looks and function also matter. An item that’s in great condition will tend to have a fair market value that’s higher than the same model in average condition, which itself will have a fair market value that’s higher than a model that’s in poor condition and being sold as a parts gun.

Lastly, there’s the issue of inflation. Even though the value of the most common makes and models is expected to decline over time, high inflation can make an older gun have a fair market value that’s similar to or even quite a bit more than the original price you paid for it.

How to Determine the Fair Market Value of Your Guns

With all of the factors at play, determining the fair market value of your guns on your own can be tricky. Luckily, there are lots of great resources available to help. Experts recommend a process to evaluate each item and it’s fairly easy to follow.

Note Your Gun’s Characteristics

The first step is to make sure your firearm is unloaded and then note some basic information about the item:

Make and Model

Identify the exact make and model, if possible. Important markings can appear in many different places, including on a slide, frame, receiver, barrel, trigger guard, ejection port or even under the crane on a revolver. Make a note of every marking you can find. It will be helpful information if you need to consult with a gun expert, refer to a resource document or ask questions in an online forum.

Physical Features

Other key information to note includes the type of firearm (handgun, pistol, shotgun or rifle), its specific type of action (bolt action, break action, semi-auto, revolver, etc.), its caliber and its measurements (barrel length and overall dimensions). It’s helpful to be as specific as possible with the details. For instance, a revolver could have a solid frame, top-break, tip-up or swingout cylinder.

Physical Condition

The condition of the firearm is also important to note. There are several different systems for judging the condition of a firearm. The NRA condition standards are widely used, and include classifications for modern firearms such as:

New
Perfect
Excellent
Very good
Good
Fair

For antique guns there’s a separate system with classifications such as:

Factory new
Excellent
Fine
Very good
Good
Fair
Poor

All the condition classification ratings have very specific definitions.

Determine Your Gun’s Value

Armed with the information you collect about your firearm’s characteristics and its condition, you can then consult gun value resources. Pricing guides are one of the best resources available to the average gun owner and there are quite a few of them to choose from. Resources include:

Blue Book of Gun Values
Flayderman’s Guide to Antique American Arms
Standard Catalog of Firearms
Standard Catalog of Military Firearms
Standard Catalog of Smith & Wesson
Standard Catalog of Winchester
Standard Catalog of Colt
Standard Catalog of Remington
Standard Catalog of Luger

The Blue Book of Gun Values is one of the most popular resources. It’s frequently consulted by insurers when a firearm owner has a claim about one of their guns. All of these resources are updated regularly with new items and new values, so make sure to consult the most recent edition for the most accurate values.

How to Protect Your Firearm Property’s Fair Market Value

As any fan of outdoor recreation or shooting sports can tell you, firearms and their accessories aren’t cheap. Whether you have one gun or many, their values can quickly climb to thousands of dollars. With all the effort and time you’ve put into building your collection and maintaining your guns, it’s important to protect them.

With Lockton Affinity Outdoor Firearm Insurance, you receive coverage up to the fair market value to replace or repair your guns and their attached accessories if they are damaged, lost, stolen or ruined in a fire or flood.

Our coverage is tailored, letting you choose your own limits and it’s available to a wide variety of gun owners. We make purchasing coverage affordable, and strive to provide best-in-class customer service if you have a question or need to file a claim.

As one of the nation’s top firearm insurance providers, we insure hundreds of millions of dollars worth of firearms and have been in business over 25 years, so you can trust us to help protect your guns.

If you have questions about insuring your guns with us, we’re happy to help. Contact our firearms insurance experts at (844) 401-9444 and or learn more about Lockton Affinity Outdoor insurance options.