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Engagement Ring Appraised & Insured (Finally)

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Napolean 1 Diamond NecklaceOver a year ago, I wrote about how we were going to get my lovely wife’s engagement ring appraised and insured that weekend. Well… ha ha, as all things are, it took a little longer than anticipated but we finally got it appraised in May and insured last week (yeah yeah, over a year later).

We eventually had it insured through Jewelers Mutual Insurance, recommended by the appraiser at Edward Arthur (where the piece was appraised). I had called up Traveler’s, our homeowner’s insurance policy underwriter, and received quotes that were similar priced. The logic was that, given the same premium, we should go with a company that deals with jewelry related claims on a regular basis rather than a general insurance company. Another reason was that in this case, a jewelry loss would have no effect on our homeowners insurance premium.

Replacement vs. Dollar Value Coverage

The type of insurance we purchased was for replacement coverage. That meant that if we did suffer a loss, JMI would replace our covered jewelry with something similar or better. The other option is where you get the dollar value of the appraisal. So if your piece was appraised at $5,000 and you somehow lost it, you would be compensated $5,000 for your loss.

Premiums

As I was filling out the form, I started playing with the deductibles, coverage amounts, and “other factors” to see how they would affect the premium. For the sake of simple math, I put in the dollar value of the piece of be $10,000 and found that the difference between a $5000 deductible and a $1000 deductible was a mere $7 a year (8%). The premium went from $84/year for the $1000 deductible to $77/year for the $5000 deductible, though that does represent an 8% difference. This may seem like very little but the reason is because the item covered was an engagement ring/wedding band set that is worn daily. You could have no safe or an 80 lb. anchored floor safe with a digital lock, sharks with lasers, and your premium would not change because the piece is worn daily. (I made up the sharks part, but it’s likely that would have no effect)

That’s when I decided to have some fun and put in a $10,000 necklace that is worn only for special occasions. If you had no alarm, no safe, and just kept it in a hiding place while you weren’t wearing it, the premium would be $131 for a $1000 deductible and $120 for a $5000 deductible (9% difference). However, in changing the “other factors,” the premium didn’t change at all. Keeping the necklace at a safe deposit box at a bank still had a $131 premium. You could have an armed killer robot guard wear your necklace while you weren’t wearing it and it would still cost you $131 a year. It could be that those factors don’t affect the application’s calculator, since they are subject to verification, but it seemed like they should add a note if that was the case.

Unscheduled Jewelry Insurance

The items that you specify for coverage go on a “schedule.” Usually you have your more valuable or expensive pieces put on the schedule because you’ve had them appraised and would like insurance. Unscheduled is everything else and you can get a catch-all coverage for all those. At JMI, the coverage was $1000 with a $100 deductible for $15. If you wanted more coverage, it’s essentially at those intervals ($2000 of coverage with a $100 deductible cost $30/year). We didn’t elect this coverage.

Application Process

The application process was a piece of cake. You can submit all the details online through a slick Flash-like form and then email, fax, or postal mail your appraisal forms to JMI for verification. Within ten minutes we had coverage, very technology friendly so far.

Knock another one off the checklist, albeit a year-plus from when we put it on. :)

(Photo by dbking)

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6 Responses to “Engagement Ring Appraised & Insured (Finally)”

  1. tom says:

    Jim,

    I bought my wife’s ring from Blue Nile and it came with an appraisal. In your experience do you recommend getting another independant appraisal or just basing it off the one we receieved from Blue Nile?

  2. jim says:

    tom: I would get coverage based on the value on the Blue Nile appraisal and then send that appraisal in. If the insurance company doesn’t accept it, then get an independent appraisal. Blue Nile is a big reputable company, I imagine they have certified appraisers there. There’s no sense spending $50 or $60 (however much it is) for another appraisal if you don’t need it.

  3. tom says:

    Good call…

    Thanks!

  4. I’ve recently done that as well. At the same time I reviewed our homeowners insurance. Since prices have gone up so much I was worried the replacement cost if our house burned down would be greater than what we determined three years ago since the last review. Turns out I needed to add a bit to our insurance coverage.

  5. Tim says:

    Tom: get an independent appraisal. Blue Nile’s appraisal just like other “in house” appraisals are bloated. My guess is that Blue Nile’s appraisal was far more than what you paid (at least mine was). The very fact that your purchase price and the appraisal price from the same company is so different would lead you to getting an indie appraisal. The indie appraisal will undoubtedly appraise the ring near what you paid for the ring if you just bought the ring. If you bought the ring a few years back, even a couple of years, with the spike in metals and jewels the past two years, the indie appraised value will be high.

    In general, you need an appraisal for items about $10k in value. The problem with bloated appraisals is that you are paying more premium than what the replacement cost of the ring actually is. If “you” can buy the ring for much less than what is appraised, means the actual replacement value is much less than the appraised value. Don’t get caught up in the warm fuzzy that you bought a new ring and someone appraised it for $x thousands over what you paid.

    Replacement value means just that. So, Jim, I must clarify a few of your points. You can insure anything for however much you want, but that doesn’t mean that you will get that amount even with replacement value. If you insure the ring for $5k and have replacement value coverage, you don’t necessarily get $5k compensation. If the ring can be bought for $2k, you will get $2k. Remember it is replacement coverage–that is, what it cost to replace the ring with like kind. The $5k means that the insurance company will pay no more than $5k, but does not mean the insurance company won’t pay less. The insurance company also has the option to replace the item of like kind, especially when there is such a disparity between what was appraised and what you bought the ring. Since insurance companies are volume buyers, they will be able to obtain diamonds below what you as an individual buyer can buy the same diamond.

    Although you might get an appraisal far higher than what you paid for the ring, I would turn the appraisal in, but insure for what you bought the ring for. Bottom line is that the actual replacement cost lower than what you paid for the ring to begin with.

    Second Jim, despite having coverage with Jeweler’s Mutual, it isn’t independent of your home owner’s insurance. Insurance points still accumulate and go on your CLUE Report (you can get a free CLUE report each year). Claims made with Jeweler’s Mutual can affect your home owner’s premium if your insurance points add up. so, it’s not necessarily mutually exclusive; however, if you are prone to losing things, then having a separate insurance company schedule your valuables is probably better so that your home owner’s insurance company doesn’t drop you for having too many claims with them. This is the reason for having separate insurance providers.

    the negative to having separate insurance providers is that you can often get multiple policy discounts in having only one insurance provider for home owner’s/renter’s, auto, liability, umbrella, etc.

    last thing Jim, you schedule items because the value exceeds the standard limits of the general insurance policy, not because you’ve had them appraised. Your home owner’s/renter’s insurance policy does cover jewelry up to a set limit (normally no more than $500). Because things like jewelry can exceed that value, you schedule or have a separate rider on your insurance policy to insure the items beyond that limit. It’s good you opted out of the general unschedule coverage, since your home owner’s/renter’s insurance already covers those items. You also schedule items that aren’t covered in the general insurance policy.

    there is a formula for everything and insurance companies have great actuaries to come up with models. Your scenario would more than likely result in an actual difference, but overall insurance premium doesn’t skyrocket based on given factors. If you have filed claims before, that would affect more than anything, as would poor credit history.

    Really the last, last Jim…you are more likely to get less for a claim with an insurance provider that deals strictly with jewelry, because as I mentioned above, the insurance company can be a volume purchaser and has a much better valuation of what your jewelry is worth since it only deals with those kinds of claims. With a general insurance provider, the chances are they will simply write a check rather than go through the hassle of replacing the jewelry with like kind.

  6. MBL says:

    This is terrific, I have been saving up for an engagement ring myself to pop the surprise question with someday. I hadn’t realized there were jewelry coverage available but it does make sense that it is all related to what the appraised value is.

    However you choose the insurance coverage, it is important to remember what the cost of replacement would be.

    Case in point, when my car was totaled, the insurance only paid for the blue book value of the car which was 8K on a 3 year old car which was not enough to replace it with a new car. That was when I found out a family friend had her car stolen but the insurance coverage replaced it with a new car. She paid a little extra for that kind of coverage. I did not know such coverage exist at the time so now I do have that kind of coverage on depreciable assets.

    Communication and education, that’s what it is all about.


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