Overview on Jewelry Appraisals

In the jewelery industry, we don’t talk about insurance nearly enough. Clients may feel that it’s fairly insignificant and are really only interested in the jewelry item and how it is received. I completely understand. Why would you be looking for insurance when you are madly in love and about to propose to your future fiancé?! While it may not be the most exciting topic when it comes to jewelry, I’m here to shed some light on the importance of insurance appraisals. Due to the rise in crime, it must be addressed. The Jewelers Security Alliance (JSA) recently released their 2021 annual crime report, which can be found HERE. In the report they outline the sad reality of the astonishing percentages of crime rates that have increased from 2020 to 2021. In this blog I would like to address the different factors when it comes to jewelry appraisals, such as: What jewelry Insurance companies are looking for, examples of jewelry Insurance situations both good and bad, and questions you should be asking about jewelry appraisals.

What is Jewelry Insurance

What is a jewelry insurance appraisal? This is a written document signed by the jewelry company or appraiser stating the RETAIL valuation of an item. The jewelry appraisal is NOT a value that a jeweler, a pawn shop, or just any buyer is willing to pay. The jewelry appraisal is solely for insurance purposes. The description of an item helps insurance companies work with their agents to replace a lost, stolen, or damaged product. If my jewelry is lost, will the insurance company replace it? Yes. If you have insurance on your ring then the insurance company will work with a local jeweler or one of your preference to replace the ring. (Later in the blog I will go into valuation of jewelry replacement.) If my diamond is missing will jewelry insurance replace it? Yes, If you have insured your diamond jewelry, call your agent and work with them to replace your diamond. Another question I often receive; I want to upgrade my lost diamond. Will the insurance company allow me to upgrade my now lost diamond? The short answer is yes. However, they will work with the jeweler to provide compensation for the lost diamond, and then you will work with the jeweler to provide the difference in value.

Will the insurance agency pay me the assigned appraisal value for my ring in the form of cash? No, Unless stated in the policy agreement the insurance company does not agree to pay you full appraisal value for your ring. All policies are different, but this is not common practice. What if I choose to not replace my lost ring? Will the insurance company pay me the value of the appraisal? Again no, however, this depends on what your policy specifically outlines. Your insurance company will work with you and negotiate a settlement based on actual value. What is the actual value of a jewelry item as opposed to the appraisal value? Well, in short, it is typical for a jewelry company to inflate the appraised value as a sales tool or as a means of showing differences in perceived value from other jewelers. However, while overvaluation on an appraisal is common practice, it often creates confusion and frustration for customers later on and therefore, reputable jewelers should avoid the practice. I will go more into this later in the blog.

So, what is the actual value of a jewelry item? Well, in most cases, it’s not the appraisal value. Some stores will mark up the value from purchased price by 20%, some mark up from purchased price by 50%, and sometimes the mark-ups continue to greater degrees. Just know that the more it goes above the price you paid, the more you are paying to insure it. And the more likely the insurance company will have an issue with the valuation when trouble actually arrives at your doorstep. Let’s move on to an example to help lay this out for you.

Engagement ring Insurance Example

Let’s start this off by giving an example. Let’s say you are looking for an engagement ring for your significant other. You work with someone you have come to know and you choose a diamond and a mounting to set the diamond into. You receive an email or a call that the engagement ring is ready for pick up. Let’s stop here for a moment. Let’s say you got a great deal on a 2.00ct. round diamond and spent $20,000. Would you want to have this ring in your possession without insurance? I’m going to go out on a limb and say, absolutely not! So, you need to make sure that your engagement ring is insured PRIOR to it being shipped, or you picking it up. You may ask; How do I go about insuring my engagement ring? Think of jewelry insurance in the same way you insure your vehicle. You would call your insurance company and let them know the make, model, year, and Vin number of the vehicle. They research your car and they assign value. How can Insurance companies assign value on an engagement ring? Well, simply put they rely on appraisals from the jeweler or company from whom you purchased your ring. If an appraisal is not automatically provided when the sale is final, then make sure you ask for one. If for some reason the jeweler can’t provide an appraisal (perhaps because they don’t have a professional who can give an accurate valuation), then search for someone who can provide a jewelry appraisal for you (such as a Graduate Gemologist, like myself!) When you have the appraisal, you can then insure the engagement ring. I must add that recently, jewelry insurance companies are becoming more stringent when it comes to the appraisal document. They are requiring a Graduate Gemologist or someone who holds a similar degree to complete the appraisal paperwork. So, do your research and ask your jeweler these questions before hand.

Now that you have your appraisal and are ready to insure you may ask, what can I expect to pay for jewelry insurance? Typically, it’s anywhere between $15 to $20 per $1,000 that the item is appraised for. So, if you spent $20,000 on an item and it was appraised for $24,000, you should expect to pay insurance between $360 to $480 annually. This amount will cover you if the piece is lost, stolen, or damaged. If you are looking for an insurance company to help you specifically with your engagement ring, then look no further than Jewelers Mutual! Click HERE to read more about this company. They are the leading insurer for jewelry and many different agencies in the jewelry industry use them as their go-to insurance company to work with!

Here are some helpful questions to have ready to ask your insurance agent; If I lost my ring will you replace it? If my ring was damaged, will you pay to fix it? If I lost my ring overseas is it covered? If I choose to get cash for my lost ring, what will you pay me for it? If someone other than the insurer is wearing the ring and it is lost, will you still cover the ring? These questions will help you establish a solid understanding of what you can expect from insuring your jewelry. It’s better to know the answers to these questions now, rather than later when trouble comes. Because fine jewelry is so small, delicate, and valuable, it can easily get lost, it can easily be damaged, and ultimately stolen! So do yourself a favor and take the time to carefully insure your engagement ring before you pick it up or have it sent to you.

A series of Unfortunate events

I recently read an article in the Southern Jewelry news found HERE about the view from an insurance adjuster named Robert James. (Click HERE to read more on his work.) This article brought light to an area of the jewelry industry I have not always understood. As I stated above, the appraisal value and the description of an item is very important and really shouldn’t be taken lightly. In this example, Mr. James recalls working with an insurance company on a claim. A retail jeweler sold a “Custom Made” wedding set for $12,000 but appraised it for $18,000. The customer contacted their insurance company and insured the ring for $18,000 - the value stated on the appraisal as the “custom made ring.” Unfortunately, when the rings were lost and the client filed a claim to receive compensation from the insurance company, it was discovered that the ring was actually a manufactured ring and not a true one of a kind custom made ring. The insurance company had an “invoking appraisal and umpire clause” in their policy, flagging the claim as problematic. Unfortunately for the customer, the inflated valuation on their appraisal caused a number of problems. First off, due to the over inflation of the valuation of the wedding set, they had been paying more for insurance coverage than the rings were actually worth. Second, these wedding bands were not actually custom made rings - they were mass-manufactured items, so the customer was sold on an item with a false description. So, what ended up happening in this jewelry insurance case? The insurance could only replace the rings for their actual value at $11,500, and the client has filed a lawsuit against the jeweler for falsifying information. This is just one quick example of how important it is to work with a reputable jewelry store or appraiser.

Additional insurance comments

Now that you have some understanding of jewelry insurance and appraisals, you may have some additional questions. How often should I have the appraisal value looked at? Well, according to Jewelers Mutual in a post found HERE, they say to review your appraisal and policy every two years. The reason they state this is because the jewelry market could change and you might be under valued in your item and therefore under covered. Another question I receive frequently: Should I file a claim for a small missing side diamond or a broken prong, or really any small damage on my ring? Realistically, it’s really not worth all the hassle of filing a claim and the additional cost in the rise of your insurance rate. For repairs and replacements costing around $100, I would defer to the jeweler and have them take care of it and you pay out of pocket.

Appraiser

As insurance companies become increasingly strict in their acceptance of appraisals, they are requiring that Graduate Gemologists be referenced as the professional on the appraisal document. If you are looking for a jewelry appraiser in the state of Arkansas, I would be more than happy to help! I am a third generation jeweler and certified as a Graduate Gemologist through The Gemological Institute of America. I always endeavor to provide the most accurate appraisals for my clients, and I will personally work with your insurance company every step of the way to help you insure your jewelry.

Thank you for your time,

David F. Homsy

Graduate Gemologist (G.G.)