Insurance/appraisal question

[gracie33]

I read the archives on the topic, but still have some questions. My apologies if this has been answered before.

We got engaged this weekend (yay!), and are working on getting the ring insured. We now have two appraisals, one that came from an independent appraiser and was obtained by WF, and another that we got on our own. The problem is, we were given two different appraisal values. The original appraisal gives the estimated retail value, which is 50% above what we actually paid for it. The new appraisal gives the current retail market price, which is basically what we paid for it.

My first question is: which amount do we use for insurance purposes?

I am a bit put off by the second appraisal, which confirmed to us what we already knew: the diamond and setting characteristics and what we paid for it. I''m feeling cheated out of $75 right now.

I am wondering what purpose the second appraisal is serving?

I know that if I had to replace the ring in 10 years, we would not be able to get it at the same price as what we paid today. Heck, I know the price of a similar ring at a regular jewelry store is currently much higher than what we paid for it. So why give the current retail market price as the amount that we paid for it? The retail value seems more appropriate in terms of future replacement cost. At the same time, I wouldn''t want to pay premiums for an inflated value. When I mentioned my concerns about future replacement cost, the second appraiser suggested that we get it re-appraised every two to five years. Is this correct?

Please help!

G

 

[Skippy123]

I bet an appraiser can answer this question for you but I will answer it based on what I did. Insurance price increases as the price of the ring increases. I did not go with the higher appraisal because I did not want to have to pay more for insurance. I guess call your insurance company and find out how much it would cost you at the different prices; that could make a big difference and gives you something to think about when you decide on the amount to insure it.

Welcome and Congrats!

 

[lyra]

You should insure your ring for what it would cost to replace it exactly, with a little wiggle room. I have 2 appraisals also, and one is much higher than the other. We insured for the lower amount because as a solitaire, we just need to be able to replace the stone itself, and could definitely do that. When it is reset into its permanent setting, we will have it appraised again, and will go with a higher amount so that we'd be able to replace the entire setting. You do need to keep current with your appraisals, so that you never end up insuring for less than what you need to replace your ring.

The purpose of having 2 appraisals, IMO, is to make sure that all the critical details match up: does it match its certificate if it has one, colour, clarity, measurements, making sure there are no chips, etc. You don't have to have 2 appraisals, but it is best to have one at least, that is completely independent of the jewellery store where you bought the ring, so that you aren't getting an "inflated" valuation.

 

[JohnQuixote]

Date: 11/26/2007 11:32:18 AM
Author:gracie33

I am wondering what purpose the second appraisal is serving?

Lyra answered this question well. The letter of verification we provide is not intended as a substitute for a full third-party appraisal. We do all we can to back up your purchase here, and we also support outside appraisal - which can be a fulfilling and educational experience if you use a good appraiser.

Regarding valuation and which figure to use, I can expand on the answer Skippy gave from our company's POV:

“Replacement value” for a piece of jewelry isn’t a fixed price. An appraised valuation is simply a snapshot of what that professional estimates the piece to be worth at ‘X’ time in ‘Y’ market. Borrowing a Neil Beaty comparison, a piece of jewelry will be priced differently at a strip mall in downtown Denver than it will at a ski shop in Aspen.

We operate in a competitive market with low markups on the internet. If our clients were to purchase similar quality goods from a B&M boutique they would cost considerably more. With over 95% of jewelry still being purchased in retail stores the appraisers doing our verification letters assign values relative to that majority market. Along with our invoice (which reflects the actual price paid; a lower internet markup) our goal is to provide our clients with flexibility when securing insurance: Not all insurance carriers allow the consumer to work with their jeweler of choice, so providing this verification letter with higher price point, along with the invoice citing actual price paid, allows some choices.

Independent appraisers differ. Some estimate value according to whatever market the piece was purchased in - and may examine the seller’s invoice to do this - but most still base their valuation on pricing at average retail stores. With the transparency the internet brings there are now appraisers like Rich Sherwood who provide three separate valuations for their clients; one based on internet pricing, a second based on average retail and a third based on upscale retail. Considering that valuation is not fixed we're in favor of this approach, as it gives the consumer added flexibility when securing insurance.

 

[cara]

The insurance company will gladly take your premiums for an higher appraisal, but when it comes time to make you whole after a loss, the most you can expect from them is what it would cost them to replace to ring per its description in the supporting paperwork you submit (if you have the regular "like kind" insurance).

So a final consideration is the amount of information included in the appraisal. If you get "like kind" insurance, you want as much relevant information in the paperwork that you submit to the insurance company as possible. If you were to only submit an appraisal that listed "1 ct H VS center stone in platinum solitaire size 6" the company could give you any old stone and ring meeting that description in the event of a loss. If you submit all the supporting documentation for, say, an ACA stone, then the insurance company is now required to give you a similar ACA stone and ring.

Perhaps you can submit the lower appraisal with the supporting whiteflash documentation such as the idealscope, sarin, etc., without submitting the higher appraisal. I suspect that the insurance company will want you to pay higher premiums if they see the higher appraisal.

The only reason I can think of to go with a higher appraisal than what you paid for the ring is to protect yourself against inflation or other price rises in the ring you purchased. Or maybe the stone you got is quite rare (say an eye-clean J SI2 2.8 ct ideal cut) and it might be difficult to find a similarly priced stone if you went to replace it ever. If prices rise, you might be underinsured in a few years if you use the lower amount. However, I'm not sure its worth paying 50% more in premiums for that benefit.

 

[denverappraiser]

Your answer lies more in the details of your insurance policy than on the bottom line of your appraisal.

In most cases, the insurance company is agreeing to replace with ‘like kind and quality’ in the case of a loss. If they are unable to do that, they are agreeing to pay cash in the face value of the policy.

‘Like kind and quality’ is an important concept and it’s defined by the description in your appraisal. This is why it’s so important to get a thorough appraisal done. If it’s not written in the report then they don’t have to do it.

When you file a claim, here’s what happens:

1) The adjuster will determine if you’re a valid policyholder and, assuming that you are, they will ask you details about your loss. When, how, where, what happened, this sort of thing. Based on this interview they will determine if there is a reasonable likelihood that this represents a covered loss. Certain policies exclude certain sorts of claims, some policyholders don’t pay their bills etc. If you want to argue this point they have an internal appeals process and if you still aren’t satisfied there’s always the insurance commission.

2) Assuming that they agree to cover the loss they will need to determine assign a value to the loss. In the case of total loss claims (as opposed to damage claims) this is done by submitting the description supplied by you at the time you bound the policy to a jeweler or network of jewelers who have agreed in advance to give them good prices on things. They pay the jewelers for their time and showroom but they drive a pretty steep bargain. In the case of big diamonds they will use their own sources and supply the stone to the jeweler, just like many shoppers here will do and for largely the same reasons. The big insurers are high volume customers with skilled full time shoppers. They don’t always get the best rates on everything but they’re pretty good at this. They’ve done this before and they DO know what things cost.

3) If you accept the replacement offer, the jeweler will collect your deductible, if any, and bill the insurance company for the balance and the deal is done. They generally won’t tell you want the actual cost to the company is. The company will ask for a new appraisal on the new item and a whole new policy will start on your new ring.

4) If you decline the offer then you must justify why. What about it isn’t ‘like kind and quality’? This goes back to that same description from the original appraisal. You have to point to something in that description that’s inadequate about the replacement. Yours was bigger, yours was whiter, yours was better cut, whatever. If it’s in the appraisal you can demand it, otherwise you can’t. If you’ve got something legit it goes back to the jeweler who will make a better offer. If it’s just that you don’t like it, or you don’t like the jeweler or you simply would prefer to have money, they will usually agree to pay you or some alternative jeweler cash in the amount that they would have had to pay their guy for the replacement. This is the part that throws people for a loop. It’s not the bottom line amount of the appraisal or the policy, it’s the amount that they would have paid to exact replacement, which is often considerably less.

5) If they can’t find a jeweler who can supply you with one up to the specs in the appraisal for less than the policy limit then they’ll cut you a check for the value of that limit.

Bear in mind that your premium is based on a direct percentage of the policy limit, not a percentage of the expected amount you can recover in the case of a loss. A ring that they can replace for $5,000 with an appraisal for $20,000 will cost the same in premiums as a ring that will cost $20,000 to replace that’s appraised for $20,000. That’s 4x the premiums for the exact same coverage! Of course the insurer likes this, wouldn’t you if you were in their position?

So what’s a reasonable appraisal amount? Discuss it with your appraiser. It’s different for different items and different markets. Ask them how they came up with their value conclusion. If the explanation is in there but you don’t understand what it means, ring them up and ask. This is part of what you’re paying them for. You want a value (and a description) that leaves you fully protected in the case of a loss. What you don’t want is to pay premiums for coverage that doesn’t give you any value. If you think the value conclusion is too high (or too low), explain your case. Maybe they missed something or maybe they’re just trying to make you feel good. If there’s something about the piece that you want to be considered that’s not included in the description, ask that it be included. As long as it’s the truth, they should have no problem.

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

 

[Modified Brilliant]

Neil provided a very thorough and comprehensive answer.This is important information
for the consumer to understand. An independent appraiser should be spending time educating
the consumer regarding the nuances of jewelry appraisal valuations, premiums, etc.

Also, the appraiser should discuss his or her methods of valuation. I always make sure to explain my
valuations and how I arrive at those numbers. If you aren''t getting the information that you want or
require, have your appraiser clarify and explain. We are specialists and it''s not unreasonable for
our clients to ask lots of questions. In fact, we encourage it!

Jeff Averbook,GG
Graduate Gemologist/Appraiser

www.metrojewelryappraisers.com

 

[gracie33]

Wow, you guys are awesome! Thank you for your feedback. I feel much better about the appraisal, though I''m still disappointed with how it was done. I expected for her to show us what she was doing and explain it all, but I feel like she looked at the AGS certification, looked at the WF invoice (which I accidentally left in the paperwork), and then typed it up in a letter with her signature.

The irony was that in her letter, she stated the current retail market value as being X amount, but did note that that amount did not reflect the price at which similar jewelry could be purchased at her jewelry store. That''s because we would pay at least 50% more for the same piece of jewelry at her store! I was unable to find an independent appraiser in Indy, so we went with her.

Again, thank you for your feedback, I will be sure to follow your recommendations in dealing with the insurance company.

Also, I will post pics as soon as my fiance forwards them to me.

G

 

[JohnQuixote]

Date: 11/26/2007 8:28:08 PM
Author: gracie33

The irony was that in her letter, she stated the current retail market value as being X amount, but did note that that amount did not reflect the price at which similar jewelry could be purchased at her jewelry store. That's because we would pay at least 50% more for the same piece of jewelry at her store! I was unable to find an independent appraiser in Indy, so we went with her.

Again, thank you for your feedback, I will be sure to follow your recommendations in dealing with the insurance company.

Also, I will post pics as soon as my fiance forwards them to me.

G

Woops! Gracie m'dear, this was not an independent appraiser

(sounds like you know this).

I hope you don't mind my saying it here (for the benefit of others) but one of the cardinal rules of securing a truly independent, "disinterested party" to be your jewelry appraiser is that they do not sell gems or jewelry themselves. As I said, I know you know this, but in our profession this is an all-important "don't run with scissors" caution. You're fortunate that she did not try to sabotage the sale (to her credit). Oh the stories we all could tell...

I think I may start a new slogan: "Hey Pricescope - the best independent appraisers on the planet are only a Post Office away."

Why? Because it concerns me that you paid that amount and didn't receive a robust educational experience.

A healthy lesson in gemology is the least you should expect from this process. For a bit more money (and shipping - which I realize some may not be wont to do) anyone can receive a wealth of color/clarity/faceting info far beyond the basics, as well as cut information using current technology - ideal-scope, ASET, PGS, etc. - from a top of the class pro like Neil, Dave, Jeff or Rich.
Gracie - I'm glad you shared this here and hope you don't mind the comments... We appreciate you and are thrilled that you're engaged.

 

[gracie33]

Hi John,

I could not find an independent appraiser in Indy from my internet research. I searched Pricescope''s archives, but that didn''t help either, so I was leery from the get-go. I hope that people reading this thread will learn from my experience. Next time, I will ship it to a true independent appraiser. I just was not ready to part with it as I had just gotten it, plus, I wanted my fiance to share the experience with me. It was disappointing when the appraiser made no effort to involve us, and my review of her work will reflect that. But as long as I can get the ring insured, I am happy!

Thanks again for your help.

G

P.S. I am looking forward to working with WF again!