by James L. Sweaney
Many people think jewelry insurance is very expensive and that it only covers for theft. For these and other reasons, some folks don’t carry any insurance on their jewelry when it’s really in their best interest to do so.
The cost of insurance for jewelry is actually pretty reasonable in most areas of the USA. The cost is an annual premium that is a percentage of the replacement cost. The replacement cost is usually determined by an up-to-date appraisal of your jewelry.
Premiums vary depending on where the insured person resides. The current price for replacement insurance thru one typical insurer for single items up to $50,000 in value ranged from a low of .85% for the state of Wisconsin to a high of 3.9% for Brooklyn. Most states were around 1 %. In other words, you could buy $10,000 of insurance for $85 per year in Wisconsin, or $390 per year in Brooklyn.
The best jewelry insurance is replacement coverage for all risks, which include sudden and accidental damage, lost jewelry, theft, and fire. Most policies offer a reduction in the premium if you choose a deductible, such as a 15% reduction for a $500 deductible. Most of my clients choose to pay the full premium with no deductible because in most cases, the savings are much less than having to pay the deductible if you were to have a loss.
Another key issue is how the replacement will be made. Most companies refer you to a jeweler who replaces your item and then bills the insurance company directly. These billings are usually prenegotiated for a set amount or percentage over the jewelers’ cost. Some insurance companies own their replacement jewelers, so they choose what you get as a replacement.
Be sure that the policy states whether replacement would be done in kind. If you own a branded item, Tiffany, Cartier, Mardon, etc., or a custom made item, be sure your appraisal stipulates that brand or origin clearly and that your policy will cover the current replacement cost from a legitimate or original source. If you lose a Tiffany item, you may want a replacement from Tiffany. If Mardon Jewelers made your custom ring, you may want Mardon to make your new ring.
Jewelry insurance is usually purchased in several ways. You can buy a rider for jewelry that attaches to your existing homeowner or renter policy, and the insurer will add the premium to your annual bill. Many people mistakenly assume their homeowner or renter insurance provides adequate coverage. Homeowner insurance usually limits jewelry coverage to relatively small amounts, typically $1000 or $2000, and the homeowner deductible applies.
The important thing about a rider is to make sure you understand the cost and terms of the coverage. A rider is very easy and convenient but it pays to shop—one of my clients had a homeowner policy with a major carrier who quoted 6% for a jewelry rider in our market where the going rate is 1.5 to 2%!
A good way is to purchase coverage thru a company that specializes in jewelry insurance. We work with the folks at International Jewelers Block and Fine Arts who offer the GemShield policy. * Another specialist is Jewelers Mutual. Many of the larger companies such as State Farm or Allstate offer jewelry insurance policies, but they are not specialists in this type of coverage.
It’s clear that jewelry insurance is relatively inexpensive— at a cost of 1% per year, you’d have to carry the insurance for more than 50 years before the cost versus the benefit would begin to be questionable. It’s also clear that you should have an accurate up-to-date appraisal of the replacement value if you expect the insurer to replace the item.
A good rule of thumb in choosing a diamond jewelry appraiser is if you don’t know where to go to get jewelry appraised…read your local jewelry appraiser reviews. If you only choose one item, a diamond ring appraisal would probably be your best choice. Also, if your purpose is to sell diamond jewelry, a current jewelry appraisal will help you decide a better selling price.