How much to insure diamond rings for?
October 28, 2011 11:09 AM   Subscribe

How much should I insure a diamond engagement ring and a wedding band for?

Reassessing my insurance needs I realize I've had the wife's rings insured as a rider on our homeowners insurance, but for what I feel is a too high amount. When first purchased I paid about X and the jeweler then gave us a certificate of "Appraisal" for a value of approximately 2X. So for years I've had it insured for 2X. Common sense would tell me that the replacement cost would be for less than X, otherwise how would the jeweler make money, no? How much should I be insuring the ring for?

FWIW, the main diamond is GIA certified so I do have an objective assessment of cut, clarity, size, etc...
posted by teg4rvn to Work & Money (20 answers total)
 
Well, what would you do if they were lost or stolen? Would you buy $2X worth of new rings? $X worth? No rings at all? Whatever it is, that's probably what you should insure them for.
posted by mskyle at 11:29 AM on October 28, 2011 [1 favorite]


It might be worth having it independently appraised, in case the jeweler inflated the appraisal value.
posted by ThePinkSuperhero at 11:30 AM on October 28, 2011


My insurance company just called the (national chain) jeweler where I bought the ring.
posted by themanwho at 11:32 AM on October 28, 2011


Take it to an independent appraiser and get a recent appraisal done. For what it's worth, most insurance companies expect updated appraisals every few years, especially for pieces that have a separate rider.

If you don't want to go that route (and spend the money) start looking on the Internet for a ring that matches the specs of you wife's ring. If you can't find a similar ring, at least price out the cost of a similar stone (which should be easy as you have the GIA certificate). That should at least give you an idea of what ballpark you're playing in.
posted by sardonyx at 11:33 AM on October 28, 2011


The most important question for insurance is what you'll want to do when the object in question vanishes. Imagine you lost the ring, and consider what you would want to do to "fix it", emotionally.
- Do you want a ring as much like the original as possible, like nothing had ever happened?Then research into how much an identical GIA certified stone would be, how much a local jeweler would charge to make a setting that looks just like the detailed photos of the ring that you'll be able to provide.
- Do you just want to be able to give your wife a nice ring? Insurance company will give you $X or $2X or however much they give you, and you and your wife will go to the jewelry store and spend the insurance money on whatever she likes best in that price range. If so, just know what price range of ring she'd want to buy.
- Is this about not losing the value of the investment? If you lost the ring and got $X back you'll feel that the insurance did its job? Definitely go for the lower amount.
- Or if you lost the ring and got its $2X book value back, you'd feel that was only your due, for having negotiated such a good deal on your precious stones investment when you got engaged? Definitely go for the higher amount.

The other important thing to do is to talk to your insurance agent, and maybe call back again and talk to a different agent of the same company to confirm - if you have paperwork for $2X value, rider for $2X, and receipt for $1X, and $1X is the real market value, would they truly give you a $2X payout? Insurance companies can sometimes be kind of weaselly.
posted by aimedwander at 11:33 AM on October 28, 2011


Common sense would tell me that the replacement cost would be for less than X, otherwise how would the jeweler make money, no?

So what? If the ring is lost and has to be replaced, the jeweler will expect to make money on the replacement sale just like on the original sale.

The value will fluctuate. Your wife might get mugged at a time when gold is really expensive (even because gold is really expensive) and the replacement rings might cost more at that point. If you want to cover yourself against that circumstance, buy more insurance.

On the other hand, if you could pay cash for replacement rings without too much pain then don't insure them at all.
posted by jon1270 at 11:33 AM on October 28, 2011


Regardless of whether you accept X or 2X as the value of the rings, you will never, ever, get the jeweler's cost. And, unlike what a poster above responded, you should not forgo insurance just because you don't intend to replace the item. The ring has a value, and whether you were to buy a new ring or a new car, you should be compensated for an insured loss of value.

You have an appraisal from an expert saying it's worth 2X. Maybe he liked you and gave you a good deal (with a wink and a nudge, I know how these things work). You can go get additional appraisals, but keep in mind that appraisals are not free.

You are not trying to make a sale where you need to know how much to ask for the ring; you are trying to ensure your are insured against a loss. You are clearly free to take anything between 2X and X. Anything less than X is simply irrational. Anything between X and 2X is just a matter of how much insurance you want to carry. If your insurer is anything like mine, insuring a ring for X versus 2X is not going to be a big jump in cost (except where X<10,000).
posted by Admiral Haddock at 11:38 AM on October 28, 2011


Common sense would tell me that the replacement cost would be for less than X, otherwise how would the jeweler make money, no?

The replacement cost isn't how much the jeweller would have to pay for the materials. Its how much it would cost for you to replace it. Although, I have to ask - why did the jeweller write you an appraisal for twice what he sold it to you for? Was he a friend and only charging you material costs? Depending on how much the markup was and how long ago you bought it the 'scrap' value may be more than you originally paid for it.

Your best bet would be to get it re-appraised. If you don't want to go that route, look at the current retail prices if similar rings to get a feel for how much it would cost to replace.
posted by missmagenta at 11:40 AM on October 28, 2011


To add to my response (although this may be obvious)--you don't need a new appraisal to buy a rider below $2X. It's a free country; you're free to insure for less than the full amount. You know X is what you paid for it. You will never know the exact cost to replace it (i.e., because precious metals and gemstones all fluctuate in price and certain stones may be harder to replace). Gold, obviously, has soared in price over the past few years (and since taken a bit of a tumble); a $5000 ring bought in 1998 will cost more today. No one knows what it will cost tomorrow.

In this case, between X and 2X, the amount of insurance you get is a function only of how much you want to pay for coverage. Only you can decide that.
posted by Admiral Haddock at 11:53 AM on October 28, 2011


I disagree with Admiral Haddock's reasoning on this.

The ring has a value, and whether you were to buy a new ring or a new car, you should be compensated for an insured loss of value.

Insurance doesn't compensate you for losses, because insurance isn't free. On the contrary, the average insurance customer must collect less from their insurer than they pay that insurer over the life of their policy, or else the insurance industry wouldn't be viable. What insurance can do is spread a large loss over many years and even many people (insurance customers), thereby diffusing the pain of that loss. This makes lots of sense when protecting yourself against unlikely catastrophe, but is much less useful as a way of dealing with smaller and/or more predictable losses.

insuring a ring for X versus 2X is not going to be a big jump in cost (except where X< 10,000)

A quick Googling suggests that the average engagement ring cost is well below that threshold.
posted by jon1270 at 12:40 PM on October 28, 2011


This makes lots of sense when protecting yourself against unlikely catastrophe, but is much less useful as a way of dealing with smaller and/or more predictable losses.

Which is why one insures a wedding ring against a loss (an isolated, high casualty event) and not loss of an umbrella. I'm not sure you're disagreeing with me. Is your point that paying $100 for a $10,000 policy on a $10,000 ring doesn't fully compensate you if the ring is stolen, since you'll net only $9,900?

Obviously, that's clearly true, which leads to my other point (which again, I think you're agreeing with)--the average engagement ring is less than $10,000. Thus the marginal cost to fully insuring at 2X would be small compared the the additional coverage over X.
posted by Admiral Haddock at 12:59 PM on October 28, 2011


Let me put some real numbers on this...I have an appraisal from the day of purchase from the jeweler from the diamond district in NYC in the amount of 26K. I remember paying way back then about 13K. It was first insured by chubb at about $500/yr for the full appraisal amount. Now, as a homeowner, it is a rider on my homeowners policy at about $230/yr. Doing the math, I've paid about $3300 in premiums on the ring.

I guess the fundamental question I have should be directed at the insurer. My assumption was that upon a loss and a claim, the insurer would (based upon GIA cert. and photos) wrangle a super-de-duper wholesale cost deal to replace the ring. I wouldn't be going to a local retail jeweler and pay retail. Secondly, and I don't know if this could ever be known, is if upon claim the insurer realized that the value of a replacement is far below $26K, they'd never give me the cash to buy my own and keep the difference. In other words, at some point the insurance company must have "a number" above what they would not insure something based upon the specs. (i.e., I doubt they would have insured my ring(s) at $100K even with a bogus appraisal, once they saw the specs of the diamond(s))
posted by teg4rvn at 1:33 PM on October 28, 2011


It wouldn't be up to your insurance company to "wrangle a super-de-duper wholesale cost deal to replace the ring." It would be up to you to find a replacement ring.

Of course the insurance company would have to approve it, but depending on your insurance it could go one of two ways. They could just pay out cash for the value you've insured it for (leaving it up to you do decide how/if to replace it) or they could ask to see an estimate for the new ring you intend to purchase and authorize the jeweller directly (or cut a cheque to you once you provide the receipt for the ring you've purchased).

It all depends on exactly what type of coverage you've got and how the policy is actually worded.

But seriously, based on rates in Canada, what you're paying seems like a real deal for a ring that valuable. Personally I'd keep paying on the $26,000 value, because there's no way a ring worth that much (or even $13,000) is going to drop down in price.

Seriously, because you're dealing with values this large, go and get an up-to-date appraisal. I'm betting you'll be surprised at how much your ring has increased in value, given how much the prices for both gold and diamonds have soared in recent years.
posted by sardonyx at 1:52 PM on October 28, 2011


I'm pretty sure insurance gives you a check and you go out and replace your items. The job of an insurer is not to wrangle a deal for you.
posted by rainydayfilms at 1:53 PM on October 28, 2011 [1 favorite]


Sorry, the "wrangle a super-de-duper deal" was more of a linguistic flourish, not a suggestion that they'd be negotiating a ganga price. My assumption (which seems wrong) is that they'd be getting the cost that a jeweler would get, not retail cost. How much do appraisals cost? A couple hundred?
posted by teg4rvn at 2:03 PM on October 28, 2011


IANYJ or A. I have worked as a Jeweller and Appraiser. I have answered many questions on jewellery in the past here, but in short:

Here is the advice about insurance, along with 22 Questions to Ask Your Insurance Agent I would send my clients home with.*

This page of theirs, and your asking your agent those questions, should answer your questions, including your update.

Your appraisal after the date of purchase should have been from an independent, accredited appraiser -- not the jeweller. Appraisals should be updated maybe every two to three years - at least five - as the market values fluctuate (often dramatically). The value of your ring, at this point, is likely not the value you've been insuring it for, and wasn't at various points in the meantime, which you'd have found out if you'd made a claim. You can price the diamond via various reports published online to get a guideline using the GIA report, understanding that there are many values any piece of jewllery can have.

*The linked appraiser was hired by three or more of the employers I worked for, and many clients used them independently as well, but I never did and don't work for them and haven't had dealings with such things in years. I still feel this information stands in its own.

posted by peagood at 2:03 PM on October 28, 2011 [2 favorites]


P.S. - should've previewed

Their page about what makes a good appraisal is also something to look out for when finding your independent, accredited appraiser - ask to see a sample of their work. The wholesale cost of appraisals years ago here in Toronto varied from $40 wholesale (to dealers/businesses) to $150 retail for clients -- it's probably not much more these days, but they are worth having done well. Do not provide a copy of your old appraisal with the ring - you want to see if the opinions match up.

Now, because they are somewhat subjective, and unmounted stones are appraised differently than mounted stones (settings affect the colour and clarity by one grade, usually) - there may be a difference. You should ask for a plot of your diamond too, which may be extra, but is useful should your ring need repairs.
posted by peagood at 2:11 PM on October 28, 2011 [1 favorite]


Thanks peagood!
posted by teg4rvn at 2:12 PM on October 28, 2011


Is your point that paying $100 for a $10,000 policy on a $10,000 ring doesn't fully compensate you if the ring is stolen, since you'll net only $9,900?

I assume the $100 you're referring to is $100/year (seems low if the ring is actually worth that much, but I haven't had that particular policy quoted). What I was going for was the idea that you'd end up paying quite a lot for that policy over the course of your lifetime. If you're lucky enough to be married 50 years then you'll have paid $15k for your $10k ring. If you had instead put that $100/year in a savings account then the value of the savings at the end would probably be larger than the original cost of the ring.

That said, I fiddled with a spreadsheet to clarify my thinking and was surprised to see how damaging a $10k loss early in one's life would be if you accounted for lost compound interest on the savings you no longer have because you spent it on a replacement ring. The size and odds of the gamble you'd be taking by saving instead of insuring depend on all sorts of variables -- insurance cost, interest rates, likelihood of loss, etc., but after my little exercise I am feeling less sure of my instincts; insurance may very well make sense more often than I would've guessed.

the average engagement ring is less than $10,000. Thus the marginal cost to fully insuring at 2X would be small compared the the additional coverage over X.

Okay, I think you're suggesting a policy that pays replacement value up to $10k, not one that pays $10k regardless of actual value. That makes sense; the marginal cost of that policy probably would be smaller.

On preview, this has grown into an unintended derail. Sorry, OP. Stopping now.
posted by jon1270 at 2:29 PM on October 28, 2011


Replacement cost.
posted by davejay at 3:17 PM on October 28, 2011


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