appraisal question

[roger96]

Just curious about what you think about my friends scenario...he bought his engagement ring from a friend of a friend who is a jeweler and paid cash. After going through my whole engagement ring purchase and appraisal I asked him if he went and got the ring appraised, he said he didn''t bother b/c the jeweler appraised it for him. He bought the ring for 10K and it was appraised at 20K (to me thats ridiculous!)...and he got the ring insured based on that appraisal. When I told him he should have an independent appraisal and he was like whats the point I have the appraisal from the jeweler for 20K and if anything were to ever happen to the ring, I paid cash and this is all the insurance company has to go on is the 20K appraisal. So he thinks he would get 20K or a ring of that equivalent from the insurance company.

I don''t think my buddy got ripped off, the jeweler is a friend and he knows other people who have bought e-rings from him, but i do think hes doing himself a disservice by not appraising the ring independently...he paying hugely inflated premiums...

What does the insurance company base their replacement on in the case of a ring paid for by cash?

 

[Lorelei]

It sounds like your friend got what I believe can be called a ' feel good' apraisal, which doesn't necessarily reflect the true market or replacement value of the diamond. I don't think if anything happened to his ring, that he would get 20k back, the purpose of the insurance is to make you whole after a loss as you are probably aware, so he would probably get back close to the replacement cost at that time, or what he paid for the ring , give or take current values at the time of loss.

I hope one of the pros can pop in and give you better advice, but I think you are right.

Also an independant appraisal by a good appraiser can be very useful to give a detailed report on the diamond, and match it to the report and give a workable and fair valuation for insurance purposes. But also it can be very useful if you have a superideal cut quality stone, such as a true hearts and arrows, the more evidence you have documenting your particular stone and it's uniqueness and value due to top quality cut and other attributes for example, can come in very useful should there be a claim, and the insurance company want you to get a replacement from a jeweller of their choice, which don't sell diamonds cut to the damaged stone's standard. Having evidence of exactly what you have lost may make it easier to get a similar replacement from a vendor, and stone of your choosing, rather than having to settle for a new diamond from a jeweller you wouldn't usually patronise.

 

[arjunajane]

HI roger - Lorelei is correct in the advice she has given.
I will just add that in the case of a claim, it will depend on the type of policy he has. There *are* policies that offer the full replacement price of the sum insured - however these will not be common for items of valuables such as an ering (will usually be for homes, cars etc).
It would be worth him checking into it with his policy.
Most likely, they will take the true replacement price of that ring - based on the certificate, receipt etc. and they will replace it for the minimum amount they can.
You certainly can not pay 10k for a ring, then get a (maybe biased) appraisal, pay larger premiums for 2months, then make a claim and get a ring for 20k..it simply doesn''t make sense.

You are a good friend to be concerned about his circumstance. I hope you can convince him to get that independent appraisal done, as he is throwing away money on the insurance right now.
Good luck!

 

[denverappraiser]

With most insurance, the payout in the case of a loss will be based on the description found in the appraisal, not the value conclusion. That’s the maximum limit of liability, not the expected limit. If the insurer can replace the piece for $10k (or less), that’s exactly what they will do. The insurance companies are pretty skilled shoppers and they wield enormous buying power. They really do know what stuff costs and it would be irresponsible to their shareholders to pay more than what is required to make the policyholders whole again.

Chances are good that he thinks he’s saving money by avoiding the expense of an appraiser because he thinks he already knows everything there is to know about the piece. It’s possible, but in most cases the math doesn’t support this. A ring that cost $10k in a recent retail transaction, can be replaced for $8k (I’m guessing) and is ‘appraised’ for $20k will cost the insured roughly $400/year in insurance. That same ring with an appraisal for $10k will save $200/year in insurance premiums and will have the exact same replacement procedure in the case of a loss. Most insurers require that appraisals get updated every 4-5 years so we’re talking about a $1000 insurance savings for the cost of an appraisal. For most, that’s quite a bit of money. What he’s getting for that extra $200/year in insurance premiums is nothing. Zip. Nada. The jewelers issuing them argue that their ‘free’ appraisals are accepted by the insurance companies and then point to the big number at the bottom as evidence that you got a bargain. Of course the insurers accept them, they’re writing an insurance policy where there’s no need to pay in the case of a loss. Wouldn’t you agree to this if you were an insurer? Have him call his insurer and ask what their claims procedure is in the case of a loss or simply read the terms of the policy. It’s almost certainly not what he’s assuming.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver