Protect Yourself with Diamond Insurance
Insurance companies are similar in the fact that if they have to pay a diamond claim, they want to spend the least amount of money to replace your diamond. Yet different in the ways they go about it, and the types of policies they may offer. There are three types of basic policies ( depending on your state and the company this also varies).
All policies covering diamonds are Marine type insurance policies. I know this sounds strange but this is how they work.
ACV ( Actual Cash Value)
1) It sets the LIMIT regardless of anything, that the company is obligated to pay.
2) It establishes the amount upon which your premiums are based. The rate varies from location to location. The more dangerous your area is, the higher the rate.
Most insurance companies can replace the stone for less than you paid for it, and at best at the same price.
If you insure the ring for $20,000. and they can replace it for $6,000.00 based on the description, then that would be what they would pay to replace the item. If you ask for a "cash out" - then they pay you the estimate given by their replacement source.
I have a huge disagreement with those who leave off this highly important value in insurance appraisals for THIS type of coverage.
Appraisals should state ALL the relevant information, but unfortunately very few appraisers seem to understand this concept. They feel that reporting the insurance company's cost to replace would only anger consumers. However since the cost of the premiums paid by the consumer, are based on the valuation(s) most consumers would be outraged to learn that they overpaid their premiums for YEARS!
The amount that the item is insured for is NOT for anyone to decide but the insurance company and the client. The appraiser should have NO determination of deciding which value the item should be insured for.
Some companies base their rate on retail, and pay cost. Others will accept the lower value, and pay just that.
Using the insurance company cost to base the insurance coverage amount is very sensible and saves premium dollars, however, markets change and since these values are for close to what the item would cost they have to be updated when there are changes in the marketplace.
You can't let an appraisal get too old that you're using for insurance if the value is sensible. Many argue that stones are always appreciating... BUNK! They vary and some do go up, but others also go down.
Your mentioning about getting paid for cost increases is untrue in most states for this type of insurance. MOST INSURANCE COMPANIES DO NOT OFFER "INFLATION GUARD" on replacement policies.
Also carefully check with your agent about the type of policy as they are very different. HO is the most common series.
Here's another situation that effect many, even some that don't even know it. My friend's wife recently lost her diamond due to it falling out of her ring. The diamond was 2.6cts H in color, SI1 in clarity. It was a pretty expensive diamond. If you were to go by Rapaport the diamond would be worth somewhere in the neighborhood of 10K/ct, so close to about 26K for the diamond. They did have the diamond insured, but to my friends dismay he simply had what his insurance company called "basic coverage" which was costing him 10 dollars a month. What he didn't realize, and what was told to him after he reported the diamond was lost, was that if he had paid the 23 dollar amount/month his diamond would be completely covered at least to the point where the insurance company would replace what was lost, but in this case, which shocked him, the insurance company was only liable for up to $1,500! Now I only blame my friend for this mistake, but it brings up an interesting point. READ OVER YOUR PLAN. ASK QUESTIONS! Make sure that whatever coverage you get will at least get you a new diamond. Whether it costs the insurance company 5K to get it or not. At least you'll have your diamond.
AGREED VALUE ( sometimes called Valued At Policy)
I only know of two companies that offer this coverage... One is CHUBB and the other is Atlantic.
In an as agreed type policy.... the company simply pays you the insured amount, providing it is not grossly over valued. I think Chubb is the best company for this, and they are very lenient with writing checks for the full amount quickly and without a lot of BS in the event of a loss.
If you can get Valued at coverage DO SO its worth it. ( Incidentally, the cost is not much different from the replacement type policy cost.)
There are tremendous variances that depend on the policy, and the insurance company filing of their policies and rates with each state's insurance commissioner.
One thing for sure, they only are obligated to do what is stated in the policy and not one dime more, and that is how most act.
I am not an insurance agent, so you're own individual coverage and conditions should be discussed with your insurance professional.
Avoid companies that want to base the insurance amount at retail and only pay their cost to replace.. Find a company that will write the policy at their cost and pay their cost. This saves you insurance premium dollars.
One sure-fire way to tell if you have a competent appraiser is that he discusses the type of insurance you're buying as each different type of policy calls for changes in the market from which the value is estimated, and the number of markets that need to be reported so both the insurance company and the insured can make informed decisions.
If your company does want to charge based on retail and pay their cost, find out if your state has an overpayment of premium rule. If it does, if they replace at a lower amount than the face amount on the policy, you are entitled to a refund of the difference between the two amounts that you paid as premiums.
Florida has such a law. California DOES NOT, and dumps that liability back in the lap of the appraiser.
Also in Texas, I understand that all insurance companies have to write valued at coverage for jewelry.
Jewelry insurance coverage is usually added by means of a separate insurance rider, to a homeowner's or renter's policy. Chubb, State Farm and Jewelers Mutual will write a policy for JUST the insurance.
Jewelers Mutual however is one that insists on insuring at retail, and replacing the jewelry at cost at the jeweler where you bought the items providing he is a Jewelers Mutual "member".
Also be aware that insurance policies require special conditions that must be met, if there is a value dispute BEFORE you are allowed to take legal action against them.
Also be aware that almost all insurance policies REQUIRE the insured to disclose "ANY MATERIAL FACT THAT AFFECTS THE RISK Of/For the Insurance of these material facts is paying less than you insure it for.
A person without credentials and unqualified appraisers can cause huge problems when a claim occurs. Under describing the item is about the most common one. Intentional over-valuing is another.
ALSO AN APPRAISAL SHOULD BE INDEPENDENT AND MADE AT WHAT THE LEGAL COMMUNITY CALLS ARM'S LENGTH. THIS MEANS THAT AN APPRAISAL WRITTEN BY THE SELLER ISN'T A PROPER APPRAISAL. IT TOTALLY SHOCKS ME WHEN PEOPLE ACCEPT THE SELLER'S APPRAISAL FOR JEWELRY. THEY SURE WOULDN'T ACCEPT THE SELLER'S APPRAISAL WHEN THEY BUY A HOUSE!!!! ( NEITHER WOULD THE MORTGAGE SOURCE)!
ANOTHER ISSUE IS RELYING ON THE SELLER'S APPRAISER. THE APPRAISER YOU USE SHOULD BE HIRED BY YOU . APPRAISERS THAT ARE PAID BY SELLERS, MAKE THE PERCEPTION OF ARMS LENGTH QUESTIONABLE.
If you're appraisal is written in one paragraph or one page, it probably isn't worth the paper its written on.
A special thank you to Consumersgemlab for this valuable information!
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