From life insurance, car insurance to alien abduction insurance, almost everything under the sun can be covered with a policy. The million dollar question is, do you need one for your diamond ring too?
Like any other expensive purchase, getting an item insured helps to protect the value of our assets in the event of unfortunate scenarios. According to the nation’s largest jewelry insurer, Jewelers Mutual, the majority of claims filed in 2012 were comprised of accidental loss and damage.
And contrary to popular belief that diamonds are indestructible because they are the hardest substances on Earth, they are still susceptible to damage. In this article, we are going to discuss the various aspects of diamond insurance and offer insights to making informed decisions when you are planning for asset protection.
While the obvious reasons for getting insurance (such as mysterious disappearances, theft, fires) had always been brought up during sale pitches, there’s a lesser known reason I want to highlight to you. Did you know that the process of setting a diamond can pose significant risk of damage? This risk is heightened when the stone has a lower clarity grade like I1 or I2.
Here’s an example to illustrate this.
Having huge feathers near mechanically weak points can cause issues during setting
From the plot, the inclusions (feathers) found near the tip of this marquise can seriously weaken the diamond’s crystalline structure. This makes the marquise a high risk candidate for chipping or cleavage to occur near the tip when a force is applied.
As a result of the significant risk, it is a good idea to get the loose diamond insured prior to getting it set by a bench jeweler. In the unfortunate event of damage occuring, you can still fall back on making a claim against the insurance company.
Do you still need insurance in this case? This is a common misunderstanding many consumers have about the terminology used. Warranties and insurance refer to totally separate things. You need to read the fine print to understand what the jeweler covers in their lifetime warranty clause.
Usually, the warranty only covers workmanship issues with the ring setting. For example, if a prong is bent or if you lose a diamond as a result of improper craftsmanship, they would be liable to offer free repairs stated under the warranty.
However, if the piece of jewelry is damaged due to your negligence, the warranty is voided. Likewise, accidental losses that have nothing to do with workmanship issues are NOT covered under warranties. You need an insurance plan for such scenarios instead.
Unlike policies for other types of coverage, insurance for jewelry is unique in terms of what can be covered and what may not be covered. That’s why you need to read and understand details of each policy carefully.
For example, a rider clause on a homeowner’s policy may only insure the jewelry against certain types of losses like burglary and thefts. Partial damage to a piece of jewelry may also not be covered in this scenario.
Without making things too confusing, diamond insurance can be generalized into 3 main types: Agreed Value, Actual Cash Value, and Replacement value.
Actual Cash Value insurance takes your diamond’s current market value as the reimbursement value regardless of its initial price of purchase.
Agreed Value insurance is the value of what your diamond is worth as agreed by you and your insurance company at the point of signing the policy.
It is a negotiated value between you and the company with regards to the amount of reimbursement you will receive in the event of loss or theft.
Finally, with Replacement Value, the insurance company simply pays an amount of money for a “new” item which can be used to replace your jewelry. This means if they can find a good replacement deal, they can pay less than what is stipulated in the policy. Interestingly, Replacement Value is the most popular option for many consumers when it comes to insuring jewelry.
On the next page, I will show you some insights on choosing a suitable policy…