which appraisal to use

[zikronix]

Insured with chubb...My ring from union diamond came with an appraisal form for 5888.00 I paid 4000 for the stone and setting...The independant apraisal values the ring at 7350. That would be the local cost to replace it...for right now I insured with chubb for 7350.00 but should i just insure for 6000
at 7350 Jewelers Mutual wanted 98 a year...at 6K it was like 78 a year. Chub wants 118 a year at 7350...Its only 20 bucks more and in my opinion a superior policy but am i over insuring?

 

[RockDoc]

Date: 6/18/2006 1:03:01 AM
Author:zikronix
Insured with chubb...My ring from union diamond came with an appraisal form for 5888.00 I paid 4000 for the stone and setting...The independant apraisal values the ring at 7350. That would be the local cost to replace it...for right now I insured with chubb for 7350.00 but should i just insure for 6000
at 7350 Jewelers Mutual wanted 98 a year...at 6K it was like 78 a year. Chub wants 118 a year at 7350...Its only 20 bucks more and in my opinion a superior policy but am i over insuring?

You''ve got a rather interesting situation.

Which insurance company to insure with is probably the first question to ask yourself.

All things being equal would you want the 7350 in the form of a check if the item was stolen, or would you want a replacement item that JM gets from the jeweler that referred you to JM ( or if there is no referring jeweler, their suggested choice, of which you can pick.). If you paid $ 4000.00 how much do you think JM can replace it for? JM wants the appraisal to be at "retail" but pays their cost plus a small percentage to the replacing jeweler. Let''s assume briefly, for the moment that the cost to replace the diamond would be about the same. JM would probably be able to replace the diamond for the same price you paid, maybe even for less. If you''re paying premiums based on $ 7350.00 how would you feel if they settled the claim based on $ 4000.00? For some people, this does not bother them, other people it does.

If you have a loss and a claim submitted to Chubb, they essentially give you a check and you go where you want to replace the item. But if the price increases, Chubb would pay 150% or up to approximately $ 11,000.00. The cost increase would of course have to be justified, but if there was a severe increase in prices you have that extra "cushion" of protection.

In the JM type policy, regardless of the price increase, you would be limited to a maximum payment of $ 7350.00 ( if it is insured for that amount).

If we ignore the issue of betterment, for a difference of $ 20.00 a year, you''d obviously be in a "better" position with Chubb.
Theoretically, you would have a check for $ 7350.00 and you could go and buy whatever you wanted with it. If you went back to Union and were able to buy another diamond like yours for $ 4000.00 you have $ 3000.00 or so left over.

On the surface, this looks sort of great doesn''t it?

But now put yourself in the position of the insurance company. If you were the insurance company would you want to pay
$ 7000. for an item that could be replaced for $ 4000.?

It''s one thing if you bought the ring in the market that charges $ 7000.00 (if that is accurate), paid $ 7000.00 ( or reasonably close to that amount) had a claim and got the check and went back and paid $ 7000 for the replacement item. But you KNOW in your case, that the facts here are different.

Now if you''re the insurance company, taking the risk of a loss, is this a position that you''d want to be in? So just about every insurance policy has a set of conditions that does protect them. Somewhere in most insurance polices there is a a statement that makes the insured responsible "to disclose any material fact that affects their risk". I would think this is even in the JM policy, and probably in the one from Chubb as well. JM''s or any other replacement type policy''s obligation to pay their cost protects them, and they get premiums based on $ 7350.00 with a risk liability of paying out a lot less to settle the claim. So in the end, you really don''t have a betterment issue.

Actually the people who wrote the appraisals for you, have put you in this precarious position, UNLESS in the appraisal they disclosed how much you actually paid for the item, thus putting the underwriter at the insurance company on "notice" that you''re insuring it for more than you paid. Differently explained, in underwriter consideration of assessing risk, you have a incentive to have a claim, if a $ 4000.00 item is insured for $ 7350.00. Insurance, is supposed to put you in the same position you were in immediately before the loss. In your scenario you would be put in a far better position.

( An additional note and question here ) Did Union sell you the item and the ring it is set in. Was the purchase price of $ 4000. include the setting?

By strict legal definition, an appraisal HAS to be prepared by someone who does NOT have an interest in the property appraised. Union, by being the seller is NOT in that position. If the document they provided you with states it''s an " Appraisal", it really isn''t "kosher". The document should called something like Cost to Replace this item from our company", and if it the cost is more than you actually paid, they should disclose this fact, and state WHY the cost is higher than what you paid. IF they are going to title the document they issued as an " Appraisal" they DO have to disclose their interest in the report.

A professional, throough independent appraisal report should have the "Statement of Independence" included within the report. Well prepared appraisal reports include this, and if yours does not, probably better to "appraise the appraiser". I am of the opinion that you really need to rethink just how accurate the $ 7350.00 valuation is. Common sense tells an unrelated person that in the general scheme of things, people just don''t pay $ 7350.00 for an item they could purchase for $ 4000.00, but I will admit that the internet pricing is among the lowest, and if the $ 7350.00 amount is what Tiffany or Cartier would charge then there is some basis for that valuation,especially if you purchased a diamond of the quality that would commonly be sold by the "premium stores". I think that if this is an accurate value, the appraisal report needs to state the market level that the value conclusion is based on clearly in the report.

Chubb''s "outlook" on these type matters is generally taken as - if the insured pays the premiums we charge, we are willing to pay the insured amount if he has a loss. That is the stellar difference with Chubb. Where many insurance companies try to reduce the cost of a claim payout, Chubb is very different in their position, and I truly believe JM within reasonable limits is that way too. Most likely in the scheme of things - they wouldn''t find out that you paid less and insured for substancially more. In everyday practice, for a policy in an amount less than $ 25,000. they would ignore this.

It is my opinion however, that you address the requirement to disclose the price you paid. Chubb is VERY flexible about insuring for more, as long as it is within reason.

But let''s get back to the disclosure of material fact requirement part of this. This probably would not happen, but if the claims person discovers this later and the insurance company wants to use the disclosure of material fact, they can assert what is called "vacate the claim". If an insurance company elects to use this, they return the premiums you paid, and that is what you get.


So let''s say the policy is in force for 5 years and you''ve paid $ 600 or so in premiums... they have the option of returning the $ 600.00 and denying your claim of $ 7350.00. But if you''ve put them on notice to this and the underwriter has accepted coverage, then they don''t have a basis to do this. I DO WANT TO ASSERT THIS is NOT something insurance companies do on an ongoing basis. They prefer to have good relationships with their insureds. But they have in some cases exercised this option. There is case law, where when they have done this and it ends up in court, the terms and conditions of the policy are strictly adhered to, and the courts do rule in their favor when this has happened, but again I STRONGLY assert that this only generally happens with EXTREME cases.

I would suggest you read the policy to see if what I''ve written here is contained in your policy. IF it is I''d advise you to disclose it to them, and tell them that what you paid, and ask them for an opinion of how much it should or can be insured for.

I''ve written on this forum numerous times that the appraiser needs to know how the item is going to be insured, and how the client''s particular insurance company settles its claims, so that the appraisal valuation is prepared properly. Unfortunately, the general buying public assumes their items should always appraise or be valued for more than they paid, and that it is worth more at the time/date of purchase. They believe that this is sort of "standard". If the item is appraised at what they paid for it, they are dissappointed, and if it is valued for less, well that develops into a "minor war".

The issue of "what is really retail" and its resultant reported value or cost, has a range depending on the market level in which the value is reported, and that DOES need to be explained in the appraisal report by the appraiser. Insurance companies are beginning to realize that appraisals in many cases have values that are overstated, and many heavilly rely more on purchase receipts. I believe this is why both Chubb and JM in many instances will accept receipts as the basis for the insured amount, rather than an appraisal.


Sorry to be lengthy here, but in my opinion this is good advice, not just for you, but for other readers of the forum as well. Hopefully this is an informative help for you, even if it is not what you expected to hear.


Rockdoc

 

[zikronix]

Well that is very good. I am already insured with chubb for 7350.00. The aprasisal I recieved from union (they did the setting and stone) was 5888.00 I paid 4000 for everything this apraisal came with my purchase. While I generally accept that I maybe could pick up a 1CT ring here locally for that. Most 1Ct in my area go for about 5900 and they are I, SI1-SI2 Stones. It is not the case. Looking at the local stores I would probably be looking at 6200-6800...gotta love that over head. The independant appraiser states that it is worth about 7350 (stone and setting) which is kind of on par becuase I went into jared and shane co and for the stone alone with "simlar specs" actully worse than mine. i was looking at 6500-6900 just for the stone and about 400 for the setting...so the potential of 7000 or more if i bought it here locally. However most likely i would retrun to buying it online...and with 7350 in hand I could get a bigger or better stone...This is why I had the independant apriasial. I know I could buy a simlar stone on line for about 4300 if I got lucky. My stone was one of those stones I just happen to catch it and it was a good deal.

The independat apprasisal does state that this is based off fair market value in arizona and that they are indepandant and have no intrest blah blah, it does not however state what I paid for the stone. So back to the question im my case..am i mis understanding but I should insure for what the IA says becuase it is pretty on par with the local market. But now im concerned cause it is not disclosed in the IA what I paid for it...at least not that I see.

 

[denverappraiser]

Leave it as it is, insured at the appraised value. This is not an unusual situation, and it’s the reason that most of the insurance companies use this goofy system of valuing claims based on their expected cost to replace with like kind and quality instead of using a declared value. The companies generally view this situation as a problem and even have a name for it. It’s what they call a ‘moral hazard’, which means that you have an incentive to take less than optimum care of the piece because you will be better off at the end of a claim than you were at the beginning. Obviously less than careful clients can increase the company''s risk exposure considerably. Chubb apparently views it differently. You pay premiums - they pay claims. Personally I think they’re crazy, but they didn’t ask me, and they make way more money than I do so maybe they’re just crazy like a fox.

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

 

[Modified Brilliant]

The independat apprasisal does state that this is based off fair market value in arizona
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Zikronix,

I''m confused about this statement. Why does your particular appraisal mention "fair market value?"

www.metrojewelryappraisers.com

 

[zikronix]

it says on the intro page 1 of 9


The following report has been undertaken to determine retail replacement value (new) of the white gold and diamond ring described herein. The purpose of this appraisial report is to establish the average retail replacement value for the function of providing a basis for obtaining insurance coverage. The vaule is based on cost approach. The value is representative of this time and market.


The estimated retail replacement value new is 7350

The retail replacement value new is defined as the value that is the mode of current sales in the most common and appropriate for new like kind or comparable jewelery. The valueation of the apraised white gold and diamond ring is the replacement value as of June 13 2006 in the local Phoenix az retail jewelery market place

The specific market place addressed is the one in which the white gold and diamond ring is most commonly sold to consumers by retailers in new condition: the retail jewelry establishment in the Phoenix. Arizona area


then the next page talks about the ring specs and so on...and the last 2 pages are their credentials/ education and then the standard blah blah limiting conditions, assumptions and contingent conditions.

 

[denverappraiser]

That''s WAY more clear than most appraisers about saying exactly what he''s talking about. I gather from your research that you find his value conclusions to be credible (about the prices of comparable new merchandise in Phoenix jewelry stores on June 13). Kudo''s to the appraiser for being so clear.

Who is it?

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

 

[zikronix]

arizona gemelogical labortory in phx...they are naja member, gia, ags certifed etc found them courtsey price scope

 

[denverappraiser]

Date: 6/18/2006 4:25:57 PM
Author: zikronix
acreddited gemelogical labortory in phx...they are naja member, gia, ags certifed etc found them courtsey price scope

Do you mean these guys? ''Accredited'' is a firm in Philly, which is also pretty good, but similar names can lead to a fair amount of confusion for future shoppers who stumble across this thread looking for someone in Phoenix.

Raymond H. Mason GG, AGA, NGJA
Wendy Glover, G.G., A.G.A., N.J.A.
Arizona Gemological Lab
7975 N. Hayden Rd, Ste. A103
Scottsdale, AZ 85258
Ph: 480-946-9574

 

[zikronix]

yes thats them...sorry about that

 

[zikronix]

so back to my orginal question which value should i use...what i paid...or or the appraisal or some where in the middle...Like i said it is my personal belief that the IA is very accurate and that is what i am currently insured for 7350

 

[denverappraiser]

Date: 6/18/2006 3:04:27 PM
Author: denverappraiser

Leave it as it is, insured at the appraised value.

I'll stick with my original answer. Leave it the way it is.

ETA: This is strictly because you have a Chubb defined value policy and because you offered and they accepted an appraisal that clearly defines the paramters. I would not make this recommendation for clients of companies with replacement style policies or for clients where the appraisal is more open to interpretation about what was meant by 'value'.

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

 

[diamondseeker2006]

I would use the replacement value from Union. It still allows a cushion for some price increase but you are not drastically overpaying. The $7350 is almost double what the ring cost! Hopefully the ring will never be lost, so whay pay excessive insurance premiums over the next 50 or so years?

 

[zikronix]

i think I will stay at the 7350.0 and with chubb. with chubb in az its 1.60 per 100 with JM 1.30 per 100. Even doing a quick price scope on virtual diamonds. It already appears that I would have to pay more for a stone with simlar quality than I paid...or am i mistaken


I still have my philosphy. Insureance is the only thing you have to have. you get penilized for not having it and penilized for using it. Go Figure.