What''s a Replacement Value Appraisal

[Mister 1.54]

I''m a newbie...but very stressed about my recent purchase.

I just bought a 1.54 carat, F, VS2 (60% table 58.7% depth, Excellent Polish, Very Good Symmetry) Round Brilliant from what I know as a very reputable dealer in San Francisco. I paid about $14,000 for this stone. I see that similar stones on Pricescope are in about the same price range, so I think I got a fair deal...but, that''s not my question.

The dealer appraised it at about 20% above my purchase price under "Replacement Value"...which equals $16,800. Most of my friends say they had their stones appraised at "retail" value which is pretty much double their purchase price. For insurance purposes, should I insist on a "retail" value appraisal which would be about $28,000 or does my current appraisal work?

I obviously would feel better if I had a $28,000 appraisal, but I know I would pay more for insurance...plus, my jewler says that the insurance company would replace it with a like-quality stone and they would never pay ''retail'' anyways so the ''retail'' appraisal is really worthless.

Please advise...I''m picking up my stone this weekend.

Thanks very much!

 

[denverappraiser]

The usual jewelry insurance contract obligates the company to replace a lost item with another of ‘like kind and quality’ in the case of a loss. This means that in the case of a loss, they will use the description in the appraisal as a purchase order to find you another item with which to replace it. If you prefer to have the cash, they will pay you in the amount it would cost them to do this (less your deductible of course). This behavior will not change based on the value declared unless it is too low to cover the necessary costs of replacement. If you aren’t sure about your particular policy, ask your insurance agent to explain how they will respond in the case of a claim.

The face value on the policy is listed as an upper limit on their liability and it is used to calculate the premium. A higher declared value will result in higher premiums and no change in the method of processing a claim. Not surprisingly, most insurance companies are happy to accept documents that show unrealistically large values and to collect premiums accordingly.

Neil Beaty
GG(GIA) ISA NAJA
Independent Appraisals in Denver

 

[Mister 1.54]

Thanks Neil...you kind of supported my suspicion. So, in reality, as long as the "replacemenet value" appraisal is reflective of how much it would likely cost to find a ''like'' diamond in the market place, I am fine.

But, given so, shouldn''t it build in some sort of buffer...to compensate for the likely ability to find as good a deal/inflation/etc., for example, when finding a replacement? Is my dealer''s 20% premium over my purchase price fair?

 

[moolman]

Why don't you get a real appraisal from an independent appraiser, you spent $14K, what's another $100 or so for some peace of mind. Independent appraisers also seem to give a more realistic value too. Besides, just the value of the ring, an independent appraiser just gives you peace of mind that you got what you paid for. Asking the jeweler to appraise their own diamonds, is akin to asking the fox to guard the hen house.

You can feel good in that your jeweler does seem respectable only adding 20% to their apprasial. I think you can tell who the crooks are by how much they add, when they say it's appraised for double the value, like on TV, it's most likely they are crooks.

How can "retail" be double the value for all your friends, if everybody is getting wholesale, is there really a "retail" price. If everybody is getting wholesale, how can it be wholesale right? The real wholesale price is what the jeweler paid to the supplier, your "wholesale" price is the real price, the "retail" price is the price paid by idiots, monkeys and those that got ripped another one.

 

[denverappraiser]

Mool.

You’re the MAN! It always sounds like advertising when I say things like that.

Mister 1.54,

A 20% difference isn’t unusual at all. Appraisals are normally attached to an insurance policy for 2-3 years before they are revised and there is some reason to expect diamonds to increase in that time. Insurance companies do not usually shop using the same procedure that you are using. The replacement is normally done at a local jeweler with whom they have previously negotiated a discount price. It's usually a cost plus kind of program. The jewelers do this because it’s good advertising and because the companies are huge clients. Even so, they expect to be paid for their efforts and sometimes processing insurance claims can be a very high stress and difficult transaction. It’s fairly common, especially in the internet age, for a consumer to be able to buy for a lower price than the expected cost to the insurance company. That said, it’s not usually by very much. The companies are smart shoppers and they have some pretty astute people working for them. They don’t want to pay out any more than they have to in order to keep their clients happy.

It’s common for dealers to distribute documents along with their sales that they call appraisals and that prominently feature some very high numbers. They’ve learned the lingo of the professional appraisers and will use ‘replacement value’, ‘insurance value’, ‘fair market value’ and similar terms when they have no clue what these terms actually mean and will make no attempt to explain them. Few of their customers ask because they like the big numbers.

Neil Beaty
GG(GIA) ISA NAJA
Independent Appraisals in Denver

 

[oldminer]

I''m 100% with Neil on this question. People love "feel good" appraisals, but they end up overpaying higher insurance premiums. Pleasure leads to pain sometimes.... There are people who shop at very high end stores who actually pay close to double what Pricescope shoppers might pay. Retail numbers are elusive and not a single number. The market you are buying in determines the retail level....

Hope this gives you confdence.

 

[RockDoc]

Alternative.....

Check into the Chubb policies.... They pay cash for the amount you insure it for, even it is higher ( within reason of course). This is called an agreed value, stated value type policy.

Unlike the replacement type of insurance the stated or insured amount isn''t the limit from Chubb. If for some reason, the actual replacement costs more, Chubb pays up to 50% over the insured amount, once that is justified.

My opinion of the replacement type policy is that it stinks! You really don''t know what will happen in the event of a loss. You''re at the mercy of the claims adjuster who gets your claim. Some are really cooperative and nice. other are a pain in the posterior.

With the valued at type policy, you know you''re going to get the insured amount in CASH ( and you can buy it wherever you please) so you know what is going to happen in the event of a loss.

The Chubb agent I suggest is Dave Stone at the Plastride Agency here in FL. He is licensed in about 19 states, and has helped a lot of PS''ers get coverage from Chubb. If he isn''t licensed in your state, he''ll direct to the Chubb direct sales area.

His number is

800) 473-6603 So won''t even cost you to chat with him. He is thoroughly aware of the jewelry stand alone policy, which many other Chubb agents aren''t.

Hope this helps

Rockdoc

 

[moolman]

I got the Chubb policy, real easy, just faxed over the reciept and description, paid my premium online. They only require an appraisal for a ring worth more than $25K. With Chubb you can insure the ring at the purchase price or more if you want, they''ll let you go up as much as 25K, anything above and you need the appraisal. But insuring it for more than purchase is stupid because they will give you a 50% extra for appreciation anyway.