From life insurance, car insurance to alien abduction insurance, almost everything under the sun can be covered with a policy. But 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 an unfortunate scenario. And contrary to popular belief that diamonds are indestructible, they are actually susceptible to damage.
In fact, according to the nation’s largest jewelry insurer, Jewelers Mutual, the majority of claims filed last year were comprised of accidental loss and damage.
In this article, we are going to discuss the various aspects of insuring a diamond ring and help you informed decisions when you are making plans for asset protection.
While the obvious reasons for getting jewelry insurance (such as mysterious disappearances, theft, fires) are usually mentioned in sale pitches, there’s a lesser known reason for insuring a diamond.
Did you know that the process of setting a diamond can pose a significant risk of damage due to chipping? This risk is heightened when the stone has a lower clarity grade like I1 or I2 and has grade making inclusions like feathers.
Here’s an example to illustrate this.
Having huge feathers near structurally weak points can cause issues during setting.
From the plot, the feathers found near the tip of this marquise diamond can seriously weaken its crystalline structure. This makes the marquise a high risk candidate for chipping or cleavage to occur when a downwards force is applied during setting and normal wear.
As a result of the risk involved, it would be a good idea to get the loose diamond insured prior to having it set by a bench jeweler. In the unfortunate event of damage occurring, you can still fall back on making a claim against the insurance company.
If your jeweler already provides a lifetime warranty, do you still need insurance in this case? After all, if you damaged your ring, all you need to do is to send it back for a repair right?
Well, this is a common misconception many consumers have. Warranties and insurance actually refer to completely different things. Also, 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 for 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 or replacements stated under their warranty.
However, if the piece of jewelry is damaged due to your negligence, the warranty is usually 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.
Appraisals are important for insurance purposes.
Unlike policies for other types of coverage, insurance for jewelry is different in terms of what can be covered and what may not be covered. That’s why you need to read and understand the 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. Under a homeowner’s policy, partial damage to a piece of jewelry may not be covered.
Generally speaking, diamond insurance can be generalized into 3 main types: Actual Cash Value, Agreed 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.
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.
Out of these 3 types, the Replacement Value policy is the most popular option for consumers when it comes to insuring jewelry. But the caveat here is that the insurer’s definition of a “similar” replacement item may be different from that of yours.
For example, they may define GIA triple excellent diamonds as being alike. But the truth is far from that. In fact, there is a broad range of variances within the GIA triple excellent range.
This is why the policy details matter and why you need to be 100% clear about the terms and conditions.
With that, I hope this article has been useful in helping you understand the various forms of insurance in the market. On the next page, I will show you more insights on choosing a suitable policy that suits your needs.