The “forever” component in the statement “diamonds are forever” won’t hold true—unless your diamonds are insured. No matter how careful you are, accidents happen. If houses in Louisiana can be blown away by strong, angry winds, and houses in British Columbia can fall off cliffs due to soil erosion, imagine what can happen to a tiny stone when it’s unprotected. In fact, it’s the small, precious commodities we own that require solid coverage.
Diamonds, like houses, have both high financial and emotional value. It’s only logical that we’d want to preserve that value and ensure compensation should the unforeseen occur.
Insuring a Diamond: Types of Coverage
Your typical homeowner’s insurance policy will cover theft, damage, and loss to your home and its contents. However, your standard policy is unlikely to provide adequate coverage for diamonds or other expensive pieces of jewelry.
To deviate slightly from the topic of insuring a diamond, let us share a quick story: When we informed our insurance broker that we had a laptop and wanted it included in our standard policy, he said we would need separate coverage for it. Needless to say, we were flabbergasted, but he explained that laptops are an easy target for thieves looking to make fast cash. He doubted the insurance company would cover the laptop if it was listed as part of the “contents to be insured” in the homeowner’s policy. “Besides,” he said, “don’t you take that laptop everywhere you go?”
We’re sure it’s not just the portability factor that insurance companies shy away from—laptops may also contain valuable data that insurers would hesitate to quantify. It doesn’t matter if you’ve put 365 days’ worth of hard work into the laptop; someone could argue that it contained inappropriate data. Who bears the burden of proof?
Now, returning to diamonds. Like a laptop, a diamond goes where you go—social gatherings, trips, doctors’ appointments, and your favorite charity fundraiser. Naturally, it needs its own insurance coverage.
Depending on your insurance company, a standard policy usually covers only about a thousand dollars’ worth of luxury items such as jewelry and furs. This means that if you lose a piece of diamond jewelry, your insurance policy is unlikely to cover its full value. To adequately insure your diamonds, you will need to increase your premium to reflect their true worth—or follow whatever your broker suggests.
It might even be worthwhile to insure your diamonds with a company specializing in fine jewelry coverage, especially if you have a large or valuable collection. A specialized insurance company is better equipped to meet your needs and may be more willing to provide coverage for “mysterious disappearances.” While “mysterious disappearances” might sound dramatic, what if one morning you wake up and find your diamond is missing from its satin box, and no matter how much you search, it’s nowhere to be found?
Mysterious disappearances refer to losses that occur without any clear explanation—there’s no obvious theft, and the exact circumstances surrounding the loss cannot be pinpointed.
There are three basic types of diamond insurance—actual cash value, replacement value, and agreed value.
Actual Cash Value: This means your diamond is insured at current market rates, regardless of what you originally paid for it.
Replacement Value: This means the insurance company will pay you to replace the diamond you lost, but only up to a certain amount. This is the option most companies prefer.
Agreed Value: This means you and your insurance company agree on the diamond’s value, and they’ll pay that agreed value in the event of loss. While this type of insurance is rare, it is most beneficial for you. If you find an insurer who offers it, grab it—but be prepared for high premiums.
Note that many insurance companies will require that you replace your lost items through a firm they recommend. This is because insurance companies have significantly more buying power than individuals, allowing them to get volume discounts from suppliers.
If you use a replacement jeweler recommended by your insurance company, it may be worth taking the replacement item to an independent appraiser to ensure that it matches the original in terms of grading and value. If the insurance company doesn’t specify a jeweler, you are free to choose one yourself.
Be cautious. Due to their buying power, insurance companies often replace your diamond for less than its appraised value under a replacement value policy. This means you may end up paying higher premiums than necessary, since the insurer will know where to find a replacement at a lower cost. Therefore, it makes sense to have an independent appraiser review any replacement jewelry.
Selecting an Insurance Company
When selecting an insurance company, you should ask key questions to ensure you choose the right provider for your needs. The American Gem Society (visit www.americangemsociety.org for a free AGS Consumer Kit) suggests these questions:
- Is an appraisal required for full coverage?
- Are special security precautions required to maintain coverage? For example, do you need to install a safe at home?
- Would extra precautionary measures reduce the premium amount?
- What will the deductible be? If you choose a higher deductible, will it lower the premiums?
- Is depreciation factored in? If so, what are the depreciation rates? While jewelry depreciation is rare, some companies may include depreciation clauses in their policies.
- How often is an appraisal needed once the diamond is insured?
- Does the policy cover all risks, including damage and mysterious disappearance?
- Would coverage still be valid in the event of negligence or carelessness?
- Is the coverage valid if the diamond was in someone else’s possession when it was lost or damaged (e.g., your daughter borrowed it for prom night)?
- Will the insurance company allow you to choose a store to replace the lost or stolen diamond?
- What evidence or proof of loss must be submitted when filing a claim?
Keeping Your Diamond Insurance Up to Date
Now that you’ve insured your diamonds, what’s next? Don’t sit back and relax, lock your policy away, and forget about it. It’s important to review your policy regularly to ensure it accurately reflects the current value of your diamonds. This should be done annually, so you can decide whether to increase coverage. To determine if your insurance is adequate, have your diamonds appraised and adjust the coverage accordingly. The key is not just the type of insurance you have, but ensuring your diamonds are insured for their full and current value.
Protect Your Diamond, Even if It’s Insured
Insuring a diamond is only half the equation. Even with adequate insurance, you need to wear and store your diamonds safely. If you can’t convince the insurance company to lower premiums with security alarms and other forms of protection, you must take extra precautions yourself.
Taking precautions for your diamonds and other jewelry is a smart financial move. Diamonds should always be securely stored when not worn. If you have a valuable collection, consider installing a home safe or using a bank safe deposit box. After all, home invasions cannot be entirely prevented, even with a strong police force in your community.
Regularly check for loose settings and other damages, such as broken prongs, whenever you clean your diamonds. By making it a habit to inspect your jewelry regularly, you’ll be less likely to lose stones or incur damage that can’t be easily repaired. If you notice any issues, take your jewelry to a reputable jeweler for repairs as soon as possible.
