Jewelry Insurance 101 C: How do I get my jewelry insured and what happens if I lose my jewelry?

April 28th, 2009 by James L. Sweaney, CGA, FGA. GG

Getting your jewelry insured begins by establishing a description and value for the jewelry to be insured. You are entering into a contractual agreement with whomever you choose as your insurer, so you and the company must agree on what it is being insured and for how much. A current retail replacement value appraisal from a qualified jewelry appraiser works best to provide both parties in the contract with the same specific and detailed information.

A good replacement value appraisal includes accurate measurements, weights, identity and grades, a narrative description of the item and a digital photograph, as well as the appraiser’s opinion of the current cost to replace the item in kind. In kind means as similar to the original item as possible. If it’s a branded product, both the branded item and it’s original source may enter into the appraised valuation. For example, you can only buy a Mardon ring from Mardon Jewelers, a Tiffany jewel from a Tiffany store.

A recent bill of sale or receipt may be all that some companies require to insure your jewelry, but these often lack the details that will protect you in the future. Some insurers want a document from an appraiser not affiliated with the seller.

Once you have a good appraisal, you can show the insurance company proof of value for your items. The insurer issues you an insurance policy based on the information in the appraisal and you pay a premium based on that value. Read the policy carefully to be sure you understand the limits and terms of coverage– if you don’t understand, ask your agent.

Normally, your policy is for one year and the company bills you annually when it’s time to renew. In some cases, especially for items of high value or in an active market like we have today, your insurer may require a new appraisal every few years or even annually. The important thing is that your insurance covers the current cost to replace the item.

Our previous Blog article, Jewelry Insurance 101 B, explains the basic types of jewelry insurance policies and their costs.

If you suffer a jewelry loss, the insurer covers your loss by making you whole, i.e. replacing the lost item with something as similar to the original as is feasible. They do not pay you cash, unless you have cash value insurance.

Usually, the insurer refers you to a local jeweler who has agreed to do their replacements. In these situations, you will work with the jeweler directly. The jeweler will replace the item based on the information available about the lost item—hence the importance of a good appraisal.

You may have some choice of the jeweler who does the replacement—it’s usually someone within the insurer’s network. A few insurers allow unlimited choice as to who does the replacement. Other companies may not allow any choice of jeweler and will only refer you to a single vendor, or may do the replacement through a company they own. Obviously, it’s much easier to deal with a local vendor rather than with a company two or three time zones away. Ask the important questions about replacement procedures before you buy the insurance.

Usually, the jeweler supplies the replacement item to you directly. If you are satisfied with the replacement, he then bills the insurer for his cost plus an agreed-upon mark-up or commission. The jewelers’ commission is typically a percentage of his costs, calculated on a sliding scale—his commission percentage declines as the value of the replacement increases—he may get 50 % over cost for replacing a  $1000 item, but only 15% over cost for a $10,000 item.

In most cases, because of these reimbursement agreements, the out-of-pocket cost to the insurer is actually less than the appraised replacement value of the jewelry. On its face, this practice may seem unfair or even unethical, but it’s really not. Your premium (cost) for the replacement insurance is calculated on the insurer’s actual cost to replace. The appraised value supplied by the appraiser simply gives the insurance company a basis on which to calculate their costs.

A few companies offer policies that pay you cash equal to the appraised value of the jewelry, but your premiums are substantially higher for this type of coverage. You should also consider that when an insurer refers you to a jeweler, you have the assurance that your claim will be handled fairly and by a professional, especially when it’s a local jeweler.

Some companies, for example USAA, have very low annual premiums, but they do replacements through jewelry companies they own. In my opinion, there is an inherent conflict here, because the insurer determines what constitutes a fair replacement—it’s like getting medical treatment from your insurance company rather than from your doctor.

Other companies pay very minimal commissions and have very stringent and/or time-consuming rules and regulations. Jewelers who do replacements for these companies may not be able or willing to give you good service.

In short, there are important differences in the quality of coverage, especially in the way the insurer replaces a loss. You get what you pay for, so shop carefully. Be sure to ask your agent not just the price and limits of the coverage, but also the manner in which lost items are replaced. It’s also a good idea to research the company and to get references.

An accurate and up-to-date appraisal is the basis for getting a fair deal when you need jewelry replaced. You know exactly what the item was, the jeweler knows the precise details needed to make a good replacement, and the insurer knows just what he is replacing and how much it will cost him.

If you haven’t had your jewelry appraised or updated recently, call for an appointment—our highly qualified appraisers and state-of-the-art appraisal software are at your service!

Mardon Jewelers does not sell insurance in any way. We have an agreement with GemShield to do replacements for their clients in the manner described above.

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