Help!!! E-Ring Insurance/Appraisal - Totally Confused

[LeBron James]

Hello PriceScope members! Long time lurker, first time poster here.

So I just recently purchased an E-Ring from Yekutiel at ID Jewelry. After months of research, going to several local B&M stores, looking online at sites such as James Allen, Blue Nile, etc I decided Yekutiel was the man for the job based on positive feedback on this site. And I’m glad I chose him! The ring is beautiful and Yekutiel was a pleasure to work with. I have nothing but good things to say about him and my experience.

Anyways I purchased the ring for ~$12,000 and it was appraised in house at ~$16,000. Yesterday I purchased insurance through Jewelers Mutual and the premium is based on the appraised value of $16,000.

Basically since I’m new to all of this... what I need help understanding is... why isn’t the insurance premium based on the purchase price and not the appraisal? To me this doesn’t make any since. I am of course a novice and not an expert! If I have to file a claim and the insurance is for $16,000 does that mean I’m upgrading? What a great deal? All else being equal, a purchase price of $12,000 gets me 1.5 carats (center stone) and a purchase price of $16,000 gets me 1.75 carats (center stone). So if my insurance is for $16,000 I would like to think that I’m upgrading the ring. However to me this seems illogical.

The reason I’m asking is because the annual premium is $100 more expensive... $250 for a $16,000 insurance plan and $150 for a $12,000 insurance plan. Obviously i’d like to pay less... so what am I missing??? Any insight from the experts here would be greatly appreciated!!!

 

[rockysalamander]

If you submit both and appraisal and purchase receipt, they choose the higher value as the insured value. But, you can insure for $12k if you prefer. If you ever submit for a loss, you will get to replaced the ring/diamond with "like kind and quality" with a cap of the insured max ($16k in this case). But, if you can replace the lost items for only $10k, they will only pay $10k. You won't get a check for the difference unless you have a cash-out policy (which I'm not sure they offer). I usually recommend insuring for purchase + 20%. So, that $16 is pretty close. I like to build in a buffer for prices inflating and I'm not paying attention.

 

[LeBron James]

Thanks Salamander! This definitely helps. I now have a feeling of regret not going to an independent appraiser... maybe a 2nd opinion would have been lower than $16k and I would have saved $ on the annual premium. Or maybe the added cost of another appraisal isn’t worth it. I’ll never know. I think I’m over analyzing and will just get it appraised again in a couple years if it’s out-dated and Jewelers Mutual requires it. I just have a hard time believing $16k is needed to get like kind and quality for something I just paid $12k for. Is the insurance company aware of this and do they take advantage of this? Can’t help but wonder.

Interesting subject nonetheless! Any other opinions welcome and thanks again Salamander

 

[sledge]

I've seen this debated both ways. Agree a smaller insured value keeps the premium lower. However, as @rockysalamander pointed out to need a little fluff, IMO.

Using the most basic finance principle called the time value of money means literally $1 is worth more today than tomorrow. This is based on the fact you can put the $1 today in an interest bearing account and it would be worth $1.0x tomorrow.

While cost works different, it is similar in the fact it is rising as a whole and not decreasing. So $12k today may cost $13k in 1 year or 2 years down the road. It's hard to know for sure. Also supply and demand plays into the equation, along with world markets as a whole (ie with DeBeers introducing cheap synthetics, does it tank or boost current diamond values).

Couple this with the fact we have no idea when you will, if ever, file a claim and there is lots of unknown data and variables.

What is certain is that for $100 more per year, you get up to $4k additional coverage. I'm just going out on a limb but if you spent $12k on a stone, that is probably insignifacnt to you in the big picture. Even if you did this for 20 years and then had a claim, you would have spent $2k to gain an additional $4k of coverage. Granted if you were stockpiling $100/year in an interest bearing account you'd have $2k of your own money plus a little lost interest money from not investing. I can run you a calc if needed but probably $500 or less assuming aggressive mutual fund and no losses.

 

[Bron357]

Just make sure of your policy wording is what constitutes loss or damage and loss. Sometimes wear and tear isn’t covered, loss might only mean theft only ie evidence of breaking in and a police report. Also, do they give you the sum insured to do as you wish or do they require you go through one of their “chosen vendors” to obtain your replacement ring?
Make sure you understand what all the policy conditions are before committing to the policy, it is always devastating if you do need to claim to find out you aren't covered the way you thought you were.

 

[sledge]

I might add you could get an appraisal every year and properly insure the correct value but that in itself will probably cost you $100 as well.

 

[LeBron James]

Thank you bron and sledge. For me what it comes down to is... even with all the unknowns and variables... I’m not going to fret over an extra $100/year. To me the fluff is worth it.

The policy is through Jewelers Mutual and in the event of a claim, the replacement ring is through a vendor of my choosing and not the insurance provider, which is nice to know. I’m covered for mysterious loss, damage, theft and a couple other reasons I’m probably missing.

Thanks again for the input. You guys are great and this forum continues to be a wonderful resource.

 

[Gussie]

Dear LeBron, welcome to ps and good luck in LA!
@LeBron James

 

[sledge]

Glad to see you focusing on the big picture. I would look into some details that @Bron357 pointed out. I think JM is pretty decent from what I've read but others have found cheaper and more generous policy verbiage elsewhere.

If you choose to shop or delay I would encourage you to get a policy somewhere so you are at least covered while you figure out small details.

I saw a thread on this last time where a guy was against insurance altogether. I assume he had more wealth than others and was essentially self insuring. His theory was simple, the money paid to insurance was a loss, or cost, to him and something he saw as a gamble since he felt the odds were in his favor as he had never experienced a claim. He went on to say 100% of the premiums could be saved and reinvested. He was correct but most people don't have large chunks of cash laying around to self insure like that and IMO there is way more effective methods to build wealth than saving pennies over a very long period of time messing with self insuring jewelry.

 

[LeBron James]

Yep... I doubt I’ll need to file a claim, at least in the short term. My mom just lost her center stone after 30 years. Luckily for her it wasn’t *that* much to replace... ~$4-5k I think... she didn’t have insurance but saved $ not having to pay premiums over 30 years.

I think everyone’s situation is different. Just have to do what makes sense for you. I will gladly pay $250/year for the peace of mind... could have purchased a gently used car for the cost of the ring so it’s nice knowing I’m covered.

I’ll have to keep looking around on the forum to see what other insurance providers are out there. Jewelers Mutual kept popping up so I decided to go with them for now. The policy is good for a year.

IMO building wealth is a whole nother subject... agree paying insurance premiums is a loss but if you’re trying to build wealth it doesn’t make sense to worry about small dollars. Depends on your tolerance for risk... I’d much prefer to pay the premiums and live in peace.

 

[sledge]

Bingo it's all about risk tolerance and individual.wealth level. Like you and your mom, I'm lucky to be in a position to self insure if needed but I'd prefer to build wealth in more creative ways. But I'm also more risk tolerant than others as I believe high risk comes high reward