Insurance - Actual vs. Replacement Costs?

[SoonToBeEngagedGuy]

Thanks to all of the help on this Forum I was able to finally purchase a diamond, the setting, and pull off a great proposal....now I am looking for some guidance on insurance. I have searched through the forums but haven''t seen many postings related to this subject. If I am looking in the wrong place, please let me know.

Here are the specifics:

I purchased the GIA diamond for ~$15K and the setting for ~$5K (both are totals including CA sales tax of 8%...ugh).

After buying the diamond (which was purchased first) the jeweler appraised the replacement value at $21K. I have not had the second jeweler (the one who set the diamond and sold me the setting) appraise the ring as a whole yet.

My questions is should I have my insurance company cover the bill of sale price of ~$20K or the replacement value of ~$26-$27K. If the insurance company has to replace the stone with the exact same specifics (Carat, Clarity, Color, Cut) as well as the exact same setting, then does it make sense to get insured on the higher amount? Won''t I essentially be paying an unnecessary premium? The first jeweler said the higher amount is to cover sales tax, inflation, investment appreciation, etc, but I not sure if this was really just to make me feel better or make me feel like I got a good deal.

Please advise.

Thanks,
NowEngagedGuy

 

[diamondseeker2006]

My advice is to insure for the price you paid as that is the obvious true replacement cost. Overinsuring only enriches the insurance company. Every few years you can reappraise to keep up with inflation, if you wish.

 

[ChattyCat]

I''d get it insured for the higher value. It should last you a few years before it will need to be adjusted for inflation. Also, if your ins. co. is unable to replace your diamond, they will then pay you what it was insured for. So, it is an added protection, IMO.

Dh purchased my diamond for $7700 in 2003. We paid under rap for it. Retail was about about $13K at the time. That''s what we had it insured for. Current wholesale on a similar diamond is around $10.5K. Our ins. co. has found a diamond that we think we''re going to keep, but it took them a while to find it. We were one day away from them cashing us out for the full 13K. They''re also refunding the premiums that we overpaid, since they''re replacing it for about 9K.

You''re probably only talking an extra $5-10 a month in premiums, when you break it down.

 

[LitigatorChick]

Higher value. If you look at some other posts on this forum concerning people who have had to replace a lost or damaged stone with insurance, they are challenged to stay within their limits. Get the full protection, and rest easy knowing your bling is protected!!

 

[avlis]

if the ring is lost (by any means) how will the insurance company replace it? will they replace try to actually create a new ring, or will they just cut you a check and let you try and replace it? if you are not getting a check, i would insure it for the higher value, to insure a quality replacement. If you are getting a check, I would insure it for about 20% more than you actually paid for it, to allow for inflation and market fluctuations (especially precious metals). this number should be re-assessed every 5 years or so. At 3% inflation a $10000 ring will cost $11600 to replace after 5 years.

 

[rainydaze]

i spoke to our agent about our coverage and she went on for quite a bit trying to explain to me (which i already understood) that the insurance company reserves the right to replace my ring for the value it takes to get me what i originally had. i.e. i could insure my ring for, say, 10k but if i were to lose it and they could replace it to exactly what i had for 8k, that is what they would do. they would not ''upgrade'' my diamond/setting to reach the insured value of 10k nor would they give me 10k if i cashed out when it would only take 8k to provide me with the same spec diamond and the same setting (they would give me 8k). so, to sum, it makes sense to me to insure for replacement value, not inflated value, and to update my appraisal every five or so years. i was given no indication i would be refunded any overpayment in premiums based upon insuring for an inflated value, so it seems to be wasted money IMO.

there are many threads on this very topic with some of the pros weighing in, it would be worthwhile to do a search. it seems most said to go for replacement value over inflated. however, for insurance companies such as chubb or jewelers mutual where cashout seems to be the way they cover, maybe it is worthwhile to inflate? from those who have posted who had something happen and needed their insurance, chubb cut the check in a matter of a couple of weeks with no argument. not sure if they insured for a reasonable replacement cost or inflated, but if inflated then it sounds to me like they made out!

 

[MrYoung]

-Appraisals become obsolete every THREE years, not every FIVE. A professional appraiser should have and keep for a minimum of three years, your gemological information (as well as values). This makes it VERY EASY TO UPDATE. For a qualified apprasier, contact www.appraisers.org or www.najaappraisers.org.

-Your insurance company will replace your lost piece with a comparable item OR a monetary refund; whichever is LOWER. Dont over pay on your premiums, but dont have your item underinsured. Professional appraisers will appraise (most likely) at a "HIGH RETAIL VALUE" (but not an inflated value).

-Inflation can be tracked at http://www.bls.gov/cpi/. Click on "inflation calculator". Inflation may be considered by your insurance company- ask them.

When an insurance company replaces an item, they do so AT WHOLESALE. This means that a 10K item might cost them 6K to replace, saving them mucho deneiro on your expensive premiums. You should probably have your insurance company define how they are going to replace it before you accept thier agreement so you can value it appropriately.

Good Luck.

 

[surfgirl]

I''d advise you to do nothing until you do a search on insurance here. There are plenty of threads that will teach you the difference between replacement policies or put out policies, etc. You need to decide which one you want and go from there.