Appraisal lower than expected?

[BlueStreak]

Hi all,

Recently got an engagement ring with e-diamond appraised and while it appraised several thousand dollars more than what I paid for it online.. I feel like it is still several thousand less than what a replacement diamond would cost at a brick and mortar store (based on my shopping and getting quotes). Is this normal? My concern is with the insurance and if they will make me buy from the store that appraised it. I'm afraid I wouldn't get the same quality diamond for this price unless the store would sell it to me with no mark up which we all know is in the 40-50% range.

Cheers

 

[OoohShiny]

What are the diamond specifications and which lab graded it?
Can you provide the grading report number?

Appraisals usually inflate values above what you bought/would expect, so a more realistic valuation is no bad thing - it means you will be paying less for insurance while likely still getting the same level of cover, effectively, because they will try to only pay as little as possible anyway. (Unless you've bought a branded stone from one of the PS-recommended vendors, it is likely that an insurance company will just go "here's a GIA XXX, it's just as good as yours", even if you know the cut is far from what it should be.)

 

[marymm]

Also, was your appraiser a professional independent appraiser (meaning, not connected with a jewelry store and/or selling/buying diamonds/jewelry)?

 

[drk14]

...from the store that appraised it.

Seems like you did not get an independent appraisal, but had it appraised at a B&M store. They have a conflict of interest, and are incentivized to low-ball appraisals for any outside stones (not purchased from their store), and to inflate appraisals for their inhouse stones.

You need an independent appraiser, as pointed out by marymm.

 

[igs]

Your appraisal seems to have been done correctly. This way you're not overpaying the insurance. What you should make sure is that the appraiser put a proper and complete description of the diamond. It should mention that it is a GIA XXX. The GIA report number should be stated. Even the HCA score. The more detail about the diamond the better. In case of a loss the insurance would have to find a suitable replacement....that's why the detailed appraisal is important. Hope this helps you.

 

[igs]

Also, the appraisal should be independent and NOT from the store that you bought it from. Forgot to mention that.

 

[denverappraiser]

The standard way insurance companies approach replacement is to keep the appraisal you submit on file until claim time. They’ll then strip off the price and show the description section to their list of approved vendors and ask for bids. They’ll go with whoever can meet or exceed the specs the cheapest.

This general procedure can vary quite a bit depending on the details. For some, the approved vendor list is large and includes nearly everybody. For some, it’s a single store. Some even own the store. Some will allow you a certain amount of input and others are very insistent on who you use. None that I know of use the procedure you’re worried about of requiring you to go back to the appraiser for replacement.

The usual complaint in your situation is exactly the opposite. Your premium is based on the value conclusion on the appraisal. The replacement procedure is not. That means an inflated appraisal is doing you no favors. Fundamentally, if YOU can buy it for $xxx, they probably can too. Value above and beyond the cost to replace raises the premiums without changing the replacement procedure one bit.

In a true weirdness of this business, they may have to pay a premium, even though they’re giant volume and reasonably savvy clients. They’re very sensitive to this. The problem is that FedExing you a diamond from their office in India is not an acceptable replacement procedure for most clients, even those who did exactly that when they bought. They need to make a deal with a local showroom, and that showroom needs to be paid. How much is part of a negotiation and that’s part of how they get onto that ‘preferred vendor’ list.

 

[lolov]

I had an appraisal done once that was 100% above what I paid for the stone. If something were to happen to the stone, they would likely try to replace the stone. I am probably getting ripped off by the insurance company. That being said, if they offered to cash out, then it would be to my advantage.

 

[denverappraiser]

...if they offered to cash out, then it would be to my advantage.

*IF*, and if the cashout offer is for the full face value of the policy. This is unlikely. Read the contract.

 

[lolov]

*IF*, and if the cashout offer is for the full face value of the policy. This is unlikely. Read the contract.

I asked multiple times how they settle, and they said it depends. If they cannot do a similar stone they will cash out. Sometimes they just cash out. Even if they only paid me what I paid for the stone I would be content. I put a lot of thought into the specifications of the stone, way beyond the 4 C's that the insurance companies typically look for. So I am not too worried either way, but I would much rather do the shopping on my own.

My rate is lower than somewhere like JMI, and JMI I know for sure will not cash out.

We complain about the appraisals being too high, but I know insurance companies probably price policies with this factored in. If appraisals were not based on "B&M" pricing but online or wholesale pricing, the rates might be just as high.

 

[denverappraiser]

Who is your insurer and what state are you in?

 

[BlingDreams]

We got an incredible deal on our diamond. I've continued checking prices with the same C's and they are always 40-160% more than we paid. That being said, we have my diamond insured for a good middle ground of what it would most likely cost us to replace it (based on what we continue to see them listed for), and our insurance company (USAA) gives cash if a claim is filed/approved.

 

[lolov]

Who is your insurer and what state are you in?

Travelers insurance, Texas

 

[lolov]

We got an incredible deal on our diamond. I've continued checking prices with the same C's and they are always 40-160% more than we paid. That being said, we have my diamond insured for a good middle ground of what it would most likely cost us to replace it (based on what we continue to see them listed for), and our insurance company (USAA) gives cash if a claim is filed/approved.

My insurance would not allow me to insure for less than the appraisal, probably because they do not just cash out.

I wouldnt mind a cash out policy, but I also would not want to pay a crazy rate. If I could find somewhere that would allow me to insure for less but with a cash out option I would take it. USAA usually gets pretty good deals. As denverappraiser mentioned though, I would want to make sure the cash out is for the full amount.

 

[BlingDreams]

My insurance would not allow me to insure for less than the appraisal, probably because they do not just cash out.

That's crazy. You should be allowed to insure for however much you want up to the appraised amount. I'd suggest you explore other insurance carriers. There are several threads on here discussing the subject that might be helpful.

 

[lolov]

That's crazy. You should be allowed to insure for however much you want up to the appraised amount. I'd suggest you explore other insurance carriers. There are several threads on here discussing the subject that might be helpful.

I think it is because this is not strictly a cash out policy. There is no way to just insure for a portion of the value if they were to attempt to replace the stone. I would imagine with a cash out policy you could determine how much coverage you want up to the value of the stone.

 

[denverappraiser]

Cash out policies, or declared value policies as they're called by the insurance people, are very difficult to find for jewelry. For most people this isn't even possible and, when it is, the rates are significantly higher. I know of no company that offers this in every state, and most don't offer it at all. The details will be in the policy itself.

USAA owns a jewelry store. Their replacement procedure is to simply supply you with a new item from the store. As with the above comment, whether they will settle for cash and if so, how much cash, will be in the policy itself but my understanding is that they are very hesitant to do this. What you paid generally has nothing to do with it.

 

[denverappraiser]

That's crazy. You should be allowed to insure for however much you want up to the appraised amount. I'd suggest you explore other insurance carriers. There are several threads on here discussing the subject that might be helpful.

This is typical. The problem is that most people are overinsured on their jewelry, and the companies like it that way. A ring that they can replace for $10,000 and for which the client is paying premiums to have a maximum liability limit of $20,000 is 50% pure profit. There is no loss scenario. They have ZERO incentive to be flexible here. Normally they WILL allow you to use the transaction price, at least for a while, and you can always find a better appraiser. Believe it or not, there really are appraisers who understand what things cost. In some cases you may be able to argue the valuation with your appraiser. Ask them how they came to their conclusion. They may or may not agree with you, but they should be prepared to explain their reasoning.

 

[oldminer]

Denverappraiser is telling you exactly what needs to be frequently repeated. Paying for more coverage than what it would actually cost to make a perfect replacement of your diamond or item of jewelry simply is a waste of money. If you have shopped diligently, then possibly a bit more than what you actually paid would be generally a sufficient amount. If you shopped casually and bought because you said you had spent enough time and liked the stone, then what you actually paid likely would be just about enough. Inflating the appraisal 25% or 75% above a normal purchase cost in the market you made your initial purchase in, may make you feel good, but it does nothing for making your insurance better. It just costs more. What's the point or logic in hunting for the best value and then opting to pay way too much for insurance?

Getting "cashed out" in case of loss is pretty rare. Don't plan on it happening and you will be happier about the course of any potential replacement event. Plan instead for looking at replacements until you decide to do as well as you can and make a choice. That's a far more typical scenario.

 

[diamondseeker2006]

I insure for exactly what I paid (assuming a retail online purchase) because what I paid IS the true replacement value. I would never want an inflated appraisal, and if I were the OP, I'd be asking the appraiser to please reduce the value to what I paid. (I would actually ask for that in advance.)

 

[WinkHPD]

Years ago I did a replacement for a client with USAA coverage. I asked what I had to do to become a replacement source for USAA and was informed that it was normally not possible. However, since I had sold a unique item, a Richard Homer cut colored gem, that they could not source through their office, I was contacted to do the replacement.

Neil is completely correct when he states that USAA has their own "source" for nearly everything. I am in full concordance with those telling the OP to make sure his appraisal is very detailed and not overstated in value.

Wink

 

[lolov]

This is typical. The problem is that most people are overinsured on their jewelry, and the companies like it that way. A ring that they can replace for $10,000 and for which the client is paying premiums to have a maximum liability limit of $20,000 is 50% pure profit. There is no loss scenario. They have ZERO incentive to be flexible here. Normally they WILL allow you to use the transaction price, at least for a while, and you can always find a better appraiser. Believe it or not, there really are appraisers who understand what things cost. In some cases you may be able to argue the valuation with your appraiser. Ask them how they came to their conclusion. They may or may not agree with you, but they should be prepared to explain their reasoning.

Denverappraiser is telling you exactly what needs to be frequently repeated. Paying for more coverage than what it would actually cost to make a perfect replacement of your diamond or item of jewelry simply is a waste of money. If you have shopped diligently, then possibly a bit more than what you actually paid would be generally a sufficient amount. If you shopped casually and bought because you said you had spent enough time and liked the stone, then what you actually paid likely would be just about enough. Inflating the appraisal 25% or 75% above a normal purchase cost in the market you made your initial purchase in, may make you feel good, but it does nothing for making your insurance better. It just costs more. What's the point or logic in hunting for the best value and then opting to pay way too much for insurance?

Getting "cashed out" in case of loss is pretty rare. Don't plan on it happening and you will be happier about the course of any potential replacement event. Plan instead for looking at replacements until you decide to do as well as you can and make a choice. That's a far more typical scenario.

I do not disagree with my appraisal, per se, I think it is fair market value. But it is not the value I would be able to go online and purchase the diamond for. It is a "B&M" value.

My insurance REQUIRES I go by the appraisal value simply because the value of the ring is so high. They do not allow me to "under insure" the appraised value.

I can certainly go shop around appraisers to see if somebody would value the ring less, as some have suggested here. However, the rate of my insurance company is lower than what other insurers are quoting me. That is partly because I have other policies with them. I am not talking 10% difference, I am talking 20-30%. I am not going to go waste hundreds of dollars on appraisals handing my ring off to different people to try to get a lower value. In the realm of things, it is not going to save me tons of money unless they significantly devalue the ring.

They said if something happened to my ring, I could go to my original jeweler. For replacement setting and diamond. If a similar diamond cannot be found, then the potential cash out would be the full value of the coverage.

I think a lot of this conversation too has to do with what value we are talking about. The process and options for a ring that costs $5-10k may be different than one that is $25-50lk...mine is a high value item so they do not give me flexibility on some of the terms of how I value the item. If my ring was less expensive they would not require appraisal. I think this is pretty standard for many insurers.