Insurance Coverage, How Much is Enough
Please note: We are a gemmological laboratory. We do not sell jewellery insurance. See the Services page for the services we provide.
We hear the same complaint (and its variations) over and over again. It comes usually in two forms. Complaint One: "I have been paying a premium to my insurance company for years now on my diamond ring which is appraised for $10,000.00. I have lost the ring and the insurance company will only give me $4,500.00 in cash. They're cheating me!" Complaint Two: "I don't want to pay so much insurance. Can you appraise my jewellery for wholesale?"
On the surface, the concept of jewellery insurance is simple. You buy piece of jewellery, let's say a diamond engagement ring, for $5,000.00. You, the buyer, receive an appraisal from the seller for that amount indicating that in a fine jewellery store, that ring can be replaced for $5,000.00. You then submit that appraisal to your insurance agent who charges you a fee based on that $5,000.00 value to cover you in the event that the ring is lost, stolen or damaged. Let's say that the ring is stolen. You go to your agent and say "I want another ring just like the first one". "No problem" says the agent, "go to your jeweller, get them to make you another one just as described in the appraisal and have them send us the bill". But things are rarely that simple. First, a whole industry has grown up around the very big business of insurance replacements. It is a highly competitive and lucrative market. In the event of loss, you will probably not be allowed to go "just anywhere" (meaning a jeweller of your choice) to have your ring replaced. You will be told to go to a firm chosen for you by your agent or insurance company; but unless there is a clause in your insurance policy indicating that you have to replace at the jeweller of their choice, you really do have the choice of jewellers, with the understanding that your insurer will almost always simply opt for the jeweller who offers the lowest price to them. If you insist on going to your own jeweller eventually you will be allowed to, but there are a few things you have to understand first. 1. In your lifetime you may buy one diamond ring, or two, or four or six. Your insurance company buys hundreds every month. They expect, and receive, volume discounts from their suppliers for the items they buy. 2. Your premium of $2.00 per hundred or $3.00 per hundred is calculated on the assumption that your insurance company will pay much less to replace that ring than you will (because of their volume buying power). 3. If you want cash, to buy the item again from your own jeweller, it is unlikely that you will receive anything close to $5,000.00. You are not being cheated in this case. It simply does not make sense for your insurance company to give you more in cash than they would have to pay to replace your ring. 4. However, if you want another ring that would cost you $5,000.00 to buy, they will have it made up for you, using their volume buying power. 5. It is possible that in order to do more business with your insurance company, your jeweller may choose to replace your ring for the price the insurance company is prepared to pay. Let your jeweller discuss it with your agent. To sum up. If you do go to a replacement jeweller of your insurance company's choosing, make sure, before you sign the release form, that you insist on being able to take the new item to have the grading and value assessed by an independent jewellery appraiser, to ensure that what you are getting is the same quality as the item you had. Of course your insurer will usually not pay for this service. It's up to you to check it out, but if you find that the replaced item is not what you had before, you can get the matter corrected before it is too late (ie: before the realease is signed).
Let's go back to complaint two: "Appraise my jewellery for wholesale. I don't want to pay so much insurance". OK, so your item might be appraised for $10,000.00 and you've got a cousin in the business. Why should you pay premiums based on retail? Well, for one thing, the point of insurance is to be covered in the event of loss (see above). Your cousin may be a fine fellow but not necessarily a) a jeweller who can replace items like yours, or b) even in the business when your ring is lost. Are you willing to take that chance? If so, why buy insurance at all? You are going to be the first person to scream to high heaven if your jewellery cannot be replaced for the amount of your coverage, and you are going to be the only one you can blame. Peace of mind does not cost that much!
Questions To Ask Your Insurance Agent
Before you call up the agent who insures your home or your car and simply have your jewellery covered, there are some questions you should ask. Jewellery insurance is a specialized field. If you don't like the answers go elsewhere, shop around until you get the answers you want; but be prepared to pay for service. Remember, insurance is a product that you buy with your hard-earned money. You should be happy with what you buy. Listed below are some questions that you might ask an insurance agent. Use some or all, as the need arises, but do read through them. Check out the Chubb Canada web site for more information. The questions below are selected and reprinted from the American Gem Society handbook of appraising.
- Is an appraisal necessary for full coverage?
- What is the difference between scheduled and unscheduled coverage?
- Is there a deductible? If so, how much? Do I have the option to increase the deductible and thus lower the premium?
- Is my policy all-risk (partial loss, damage, mysterious disappearance, etc.)?
- Am I still covered if there is negligence or carelessness involved?
- Is the item covered if lost, stolen or damaged while in the possession of someone else? What if only a part is lost, stolen or damaged while in the possession of someone else?
- If there is a loss, do I have a choice of a full cash-out or will I have to accept less?
- Can I go to whomever I wish for the full replacement?
- If a loss has been replaced through an insurance company source, will I be allowed to verify proper replacement by an independent firm or accredited appraiser?
- How much will it cost per thousand for full coverage? Partial? What do I sacrifice for the limitations?
- Is depreciation ever imposed? To what and how is it computed?
- How often should I have an appraisal update?
- Am I limited to the appraised replacement cost should there be a sizable increase in the value?
- If there is damage to a piece, can I replace it or will I be limited to repair?
- What if the lost item is irreplaceable, like an antique?
- Are there any security precautions required? If not, would there be a premium savings if special precautions were taken, e.g., the items were kept in a home safe or in a safety deposit box when not being worn?
- What proof is needed to justify a claim?
- Are there different kinds of jewellery insurance available?
- Are there any exclusions?
- What is the pair and set clause? Will the insurance cover an additional amount for matching a missing item in a set if it hasn't been computed and stated?
- What types of property are not covered?
- Will you show me the actual language in the policy which addresses each concern I've expressed?
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