Jewelry Appraisals and Insurance... Why Pay More?

For hundreds of years people have been buying jewelry at great discounts. “You can buy a diamond for $5000 that’s really worth $10,000!” Or at least that’s what people were told when the item was purchased. The jeweler sold it for $5000 and gave you an appraisal for $10,000! OK... tell me one other thing in the world that you can buy for $5000 that’s really worth $10,000! Why would a jeweler sell you a $10,000 item for only $5,000? Hey... if you CAN buy something for $5,000 that’s really worth $10,000, then I’ll bankroll us and let’s buy as many of the item as we can. We can sell it for $5,500 and make lots of money! Face it… if that were the case, I would have retired many years ago!

Let’s face it… there’s almost nothing in the world that can be purchased for half of what its value is. Although one of my clients did purchase an item of art at an auction for $2000 represented to be a “copy”. Later on it was authenticated as the “real McCoy” and he sold it for $30,000! Typically, if someone receives an appraisal for $6,200 from a “certified appraiser”, on an item they paid $5,000 for, they’re doing really well and have made a great purchase. In a world dominated by the internet, the profit margin that retailers can make is dropping drastically.

In 1975, a jeweler could purchase an item at wholesale for $5,000 and easily sell it for $9000. Because the profession of Independent Jewelry Appraisers didn’t exist, an appraisal might have been as high as $15,000. Today however, that’s all changed. Retail jewelers simply cannot make the markup we did in the 70’s. In 1975 there was no such animal as an “independent professional jewelry appraiser”. If you wanted something appraised, where would you go? To a retail jeweler! And, in most cases, the jeweler who sold it also appraised it!

Let’s just take a surface look at this scenario… You buy a ring for $5,000 from your local jeweler and he/she gives you appraisal saying, “I’ll write the replacement value at $9,000.” Wow, that’s great! You purchased an item for $5,000 that’s really worth $9,000.

Why? Why insure an item for so much more that you paid for it? Who benefits by this type of inflated appraisal? I guess the jeweler does… it makes it look like he/she is giving you a great price. And, who else benefits? The insurance company! They make out by collecting higher premiums. Why pay a premium on such a high value when you know YOU can replace if for a lot less. If YOU can replace it for less, don’t you think the insurance company can as well? The insurance companies do millions of dollars a year in the jewelry replacement business. Believe me, they can buy for less than we can.

What do you think happens when you loss an item of jewelry that’s insured? No... They do NOT give you money back. Unless In fact, you’ve made specific arrangements with the company and are paying a much higher premium, most insurance company’s that you and I are insured with have an option that will allow the company to replace your lost or damaged gems or jewelry with “similar” items. That’s right… if you loss an item of jewelry, the insurance company goes into the market and replaces it through one of their “insurance replacement specialists.”

And, in fact, replacement is the best thing that can happen. As the insured, we really don’t want to go out and start looking to buy the replacement ourselves. Starting the purchase process over is much too much of a hassle.

Because of volume buying and purchase agreements with their suppliers, most insurers can purchase an appropriate replacement for substantially less than a consumer could, and most contracts limit cash settlements to the insurance company’s actual cost.

Insurance Policies:

Because of volume buying and purchase agreements with their suppliers, most insurers can purchase an appropriate replacement for substantially less that a consumer could, and most contracts limit cash settlements to the insurance company�s actual cost.

This type of descriptive appraisal will reinforce your protection and will make sure you are covered for truly similar gems and jewelry. An explicit accurate description is as important for your protection as is the estimated retail replacement value.

Because of volume buying power and purchase agreements with their suppliers, most insurers can purchase an appropriate replacement for substantially less than a consumer could, and most contracts limit cash settlements to the insurance company's actual cost. For this reason, and because it is hard to substantiate the quality of a hypothetical replacement item, you should consider accepting a physical replacement for any loss that might occur. Consult with your agent or adjuster. Cash settlements are usually less than the face value, unless your policy is an "agreed value" policy, which generally settles through a cash payment equal to the face value of the policy.

There are several types of jewelry insurance policies available; replacement policies and practices vary greatly, even among insurers offering similar insurance contracts. You are urged to consult with your insurance agent, broker or company representative as to which type of policy would be best for your needs. Be sure you fully understand the contract's settlement options and the claims policies and procedures followed by the particular insurance company before making your choice of insurance coverage.

Unless you own stock in the Insurance Company… why would you want to pay a higher premium for Jewelry Insurance?