Money

Insuring a Diamond – Protecting your Investment in Jewelry

The “forever” component in the statement “diamonds are forever” won’t be so – unless your diamonds are insured. No matter how careful you are, accidents will happen. If houses in Louisiana can get blown away by strong, angry winds, and houses in British Columbia can fall off cliffs because the soil simply eroded, imagine what can happen with a tiny stone when it’s not protected. In fact, it’s the bite-size precious commodities we own that require solid coverage.

Diamonds, like houses, have high financial and emotional value; it is only logical that we’d like that value preserved and compensated for should the unforeseen happen.

Insuring a Diamond: Types of Coverage

Your typical homeowner’s insurance policy will cover theft, damage, and loss to your home and its contents—but your standard policy is unlikely to give you adequate coverage if you own diamonds and other expensive pieces of jewelry.

Deviating from the subject of insuring a diamond for a minute, we’d like to share something: when we informed our insurance broker that we had a lap top and that we’d like it included in our standard policy, he said we would need to obtain separate coverage forit. Needless to say we were flabbergasted but he said laptops are an easy target for thieves who want to make fast cash. He doubted very much the insurance company would agree to cover the laptop if it was part of the “contents to be insured” list in the homeowner’s policy. “Besides”, our broker said, “don’t you bring that laptop everywhere you go?”

We’re sure it’s just not the portability factor that insurance companies shy away from – a laptop may have valuable data that they would hesitate to quantify. It doesn’t matter that you put 365 days worth of hard work into the laptop; someone could make the horrid suggestion that the laptop just might have contained lewd jokes or e-mail blithering. Who’s got the burden of proof?

Anyway, going back to diamonds. Like a laptop, a diamond goes where you go – social gatherings, trips, doctors’ appointments and your favorite charity fund-raiser. Naturally, it needs its own insurance coverage.

Depending on your insurance company, the standard policy generally covers only about a thousand dollars worth of luxury items such as jewelry and furs. This means that if you’re victimised and you lose a piece of diamond jewelry, chances are your insurance policy will not offer full value. To sufficiently insure your diamonds, you will need to increase the premium on your insurance policy to cover their value. Or whatever your broker may suggest.

It may even be worthwhile insuring your diamonds with a company who specializes in insuring fine jewelry. This is particularly true if your jewelry collection is large or valuable. A specialized insurance company is much more equipped to meet your needs, and would be more willing to provide coverage for so-called “mysterious disappearances.” Mysterious disappearances may seem like a dramatic phrase but what if one morning you wake up and find that your diamond is no longer in its satin box and you’ve turned the house upside down and still it’s nowhere to be found?

Mysterious disappearances are simply losses that occur without any apparent explanation. This means that there has been no obvious theft, or else the exact situation when the loss occurred cannot be pinpointed.

There are three basic types of diamond insurance—actual cash value, replacement value, and agreed value.

Actual cash value: means your diamond is insured at current market rates regardless of what you paid for it.

Replacement value: means the insurance company will pay you to replace the diamond you lost but only up to a certain amount. This is what most companies prefer to do.

Agreed value: means that you and your insurance company will come to an agreement on the diamond’s value, and they’ll pay that agreed value in the event of loss. A writer said that this type of insurance is rare but is most beneficial for you. If you find an insurance company who is willing to do it, grab it. Be ready, however, for astronomical premiums.

Note that many insurance companies will require that you replace your lost items through a firm they choose. This is because insurance companies have significantly more buying power than individuals. As a parallel to this, companies receive volume discounts from their suppliers.

If you do use a replacement jeweler that your insurance company has chosen, it may be worthwhile taking the replacement item to an independent appraiser to ensure that the new item matches the old one in terms of grading and value. If your insurance company does not impose a firm of their own choosing that will replace your diamond, then you are free to choose one yourself.

Be careful. Given their increased buying power, insurance companies will usually replace your diamond for less than the appraised value if you decide on a replacement value policy. This means that you may end up paying higher premiums than necessary since the insurance company will know where to get a replacement for less the amount you are insured for. This is why it makes good sense to use an independent appraiser other than the one selected by the insurance company.

Insuring a Diamond – Selecting an Insurance Company

When you are selecting an insurance company, you should ask them key questions so that you would be in a position to make the best decision as to the insurer who will best meet 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, having a safe installed at home?
  • Would extra precautionary measures reduce the premium amount?
  • How much will the deductible be? If you opt for a higher deductible, would this automatically generate lower premiums?
  • Is depreciation factored in? If so, what are the depreciation rates? Jewelry depreciation is rare, but some companies may include depreciation clauses in jewelry 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 got lost or damaged (your daughter may have borrowed it for her 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

All right, you managed to get around insuring your diamonds. What’s the next step? The next step is to not sit back and relax and put your policy under lock and key and then forget about it. It’s important to check your policy at regular intervals to ensure that it accurately reflects their value. This should be done annually; this way you can decide whether or not to increase coverage. To determine if your insurance is adequate, get your diamonds appraised so that you can match their value to the current insurance amount you hold in your policy. What’s essential is not so much the type of insurance you have, but that 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 picture. Even with adequate insurance, you’ll need to wear and store your diamonds safely. If you can’t convince the company to reduce the premiums on the homeowner’s insurance policy even with security alarms and other forms of protection, you need to take the extra precautions yourself.

Taking extra precautions for diamonds and other jewelry is a financially healthy move. Diamonds should always be securely stored when they’re not worn. A valuable jewelry collection necessitates installing a home safe or getting a bank safe deposit box. Anyone will tell you it’s good business sense. Remember that home invasions are a phenomenon that cannot be eliminated even with a strong police force in your community.

Check regularly for lose settings and other damages such as broken prongs each time you clean your diamonds. Getting into the habit of inspecting your jewelry regularly means you’ll be much less likely to lose stones or incur damage that cannot be easily repaired. If you notice any such problems, take your jewelry to a reputable jeweler for repairs as soon as possible.

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