insurance for ACA

[diasurfer]

hi,
I bought an ACA e-ring for my honey from whiteflash almost a year ago. [She loved the ring (and said yes), the wedding was beautiful (had it local-style here in hawaii) and I''m happy to say we''re expecting our first child.] I insured the ring with GemShield using the appraisal that came with the ring, so the amount is what I paid for it. I never had it reappraised because of my faith in WF.

It is time to renew the insurance. GemShield recommends returning it to the jeweler where it was purchased. Houston is a long way from Hawaii so I don''t think I will be doing that. If I take it to a good local jeweler, the appraisal is likely to be for a lot more money than what it is now. "Retail replacement" is almost always inflated, right? I''m sure you regular PSers deal with this issue all the time. Any advice? thanks

 

[John P]

Hey Diasurfer,

Is this something Gemshield is requiring or suggesting?

First, if you elect not to send it back to Whiteflash I suggest you take it to an independent appraiser. Do not use someone at a jewelry store.

Explain your purpose. If it's simply to update insurance figures, provide the independent appraiser with the original letter of verification and tell them you'd like an opinion on current, commensurate pricing; to update your insurance.

Remember that valuation is not one fixed price. I like to use a Neil Beaty comparison; the same piece sells for a different price at a ski shop in Aspen than it will at a strip mall in Compton. You could come up with a separate low-margin price (some call it the internet price), a commercial retail price and a high-end retail price for any piece. Communication is key to making sure you're on the same page as the person issuing a valuation.

 

[diasurfer]

The letter from GemSheild states:
"It is that time of year and the insurance coverage for your jewelry is due to expire 7/27/2008. It is recommended that you take our jewelry into WHITEFLASH (TOUCHSTONE) for an annual check-up and updated valuation, if needed. ... If the update value is the same as the current insured value, your renewal premium will be ..."

On the back is "I have reviewed the attached schedule of jewelry" and a place for the Jeweler''s Signature.

It seems like it''s optional to have it reappraised, but it''s not clear. I know it''s a good idea to have them cleaned, but not sure that every year is necessary.

The jeweler I planned to use is AGS certified and probably has the best reputation on the island.

I''ll call GemShield - I just figured this was a pretty common situation on this forum.

Thanks for replying Jonathan. Hope things are working out for you at Infinity.

 

[denverappraiser]

That’s a bone that Gemshield is throwing in the direction of Whiteflash for referring them your business in the first place. It’s not likely to be a requirement and there’s nothing conspiratorial about it. The insurance companies are in a very competitive business with one another and part of the game is to convince jewelers to be referring them since that’s the first person that most people ask. It’s illegal for them to pay referral fees unless the jeweler has an insurance license but it makes sense to refer back to the original jeweler for things like appraisal updates or repairs. It’s entirely reasonable and even smart that they keep track of where the client came from and to refer you back to that store for additional services that they might be willing to offer.

A local AGS store with a CGA on staff should be fine. If you have concerns about the value conclusion or the market selected, talk to the appraiser about it. This is part of what you’re paying them for.

I specifically recommend AGAINST submitting the little form that they sent you, and a similar form that Jewelers Mutual sends out unless it’s the same appraiser. The problem is one of defining ‘like kind and quality’. As I’m sure you know, these policies are agreeing to replace a lost item with another of like kind and quality in the case of a loss and this makes the appraisal you submit effectively the purchase order for this replacement. As much detail as possible in the appraisal protects your best interests in a replacement situation. When a 3rd party signs off on that report, you have just changed the definition from the original appraisal document to whatever summary they’ve got on the front side of that report. Usually this is a 5-10 word condensation written by the insurance underwriter, not the appraiser. In the first contract, the one that’s about to expire, YOU provided the definition in the form of the lab report and the letter of verification and everything you presented is part of the contract but this is no longer the case the 2nd time around. This time, THEY are providing the description and from my experience it’s usually woefully inadequate.

If you are using the same appraiser, the solution is simple. Have the appraiser update the entire report. Computers make it easy. They inspect the piece, make whatever revisions are required to indicate any changes and update the price to current market conditions. This also gives you a professional inspection to nip in the bud any damage or problems that may have come up. Submit THAT report to the underwriter. Appraisers in all the major societies are required to keep records for a minimum of 5 years and most that I know are pretty agreeable about this process of updating information for their prior customers.

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

 

[diamondseeker2006]

I wouldn''t change the value each year. Maybe every five years. Even if my ring has increased in value over the past year, it would not break us financially to make up the little bit of difference if something happened. I think asking for reapraisals is not only a way to throw back business to the jeweler, but it is also a method for the insurance company to raise your premiums!

 

[Paul-Antwerp]

Date: 6/10/2008 10:08:23 AM
Author: diamondseeker2006
I wouldn''t change the value each year. Maybe every five years. Even if my ring has increased in value over the past year, it would not break us financially to make up the little bit of difference if something happened. I think asking for reapraisals is not only a way to throw back business to the jeweler, but it is also a method for the insurance company to raise your premiums!

If it were a stone over 3Ct, where the price has increased more than 50% compared to a year ago, you would hopefully take another decision.

With prices rising, and probably continuing to rise in the near future (especially in USD), and considering that I want to replace the stone with an almost exact substitute (brand, cut-quality, size, and so on), it may cost you a little more to insure the true value, but you will avoid unfortunate surprises when you need it.

Which reminds me of the saying I once heard about insurance: It is expensive, if you never needed it during the insurance-period.

Live long,

 

[diamondseeker2006]

By all means have your ring reappraised if it is over 3 cts!!! Mine isn''t, so that is why I said I could wait.

And anyway, my insurance allows for inflation protection, so I really have no reason to reappraise often.

 

[denverappraiser]

Obviously there’s a limit to how often insurance limits need to be reconsidered and predicting the future is always going to be a problem. For online people, it’s really pretty easy to decide. You know what you paid and it’s often pretty easy to look up what ‘comparable’ stones cost now and you can calculate the appreciation rate based on these numbers. Using the Pricescope database and the dealers own offerings, it’s really pretty easy for a consumer to estimate what it would cost THEM to replace it and from that decide if they have appropriate insurance coverage for that eventuality.

‘Inflation coverage’ from the insurers is a mixed blessing. Many will offer an indexed price adjustment of, say, 10%/year where the coverage (and the premium) go up by a predefined amount. That’s fine as long as the real appreciation rate is the same as the presumed adjustment but it really suffers from the same ‘predicting the future’ problem that everyone else has. Recently it’s been inadequate for large high quality diamonds. There have been times and there are items where this is too much and you find yourself buying insurance coverage that’s unneeded. The tradeoff is, of course, the trouble and expense associated with updating the appraisal. For most people with a declared value of, say, $10k, an insurance policy will cost about $200/year or $600 for a 3 year span. ‘inflation adjusting’ on automatic pilot at 10% for year 2 and 3 would cause it to be $662 for the 3 year span so you’re paying the insurer $62 to save the trouble of the appraiser. Assuming this 10% number is correct and assuming that there’s nothing else of interest that would be discovered during the inspection, this is indeed a real savings but if it’s wrong then it leaves you in the position of being over or under-insured just like if you stayed with a fixed number and the other benefits from the appraisal, like discovering repairable problems that will limit future losses or identifying an undiscovered loss would be missed. As the numbers get bigger it becomes more and more useful to the client to make these decisions carefully rather than simply using an arbitrary adjustment factor.

Another common scenario is where the company will pay out more than the proscribed limits under certain conditions. Chubb, for example, will pay up to 150% of the cash limit on their standard policy if you actually replace the piece and it comes in over budget. This is effectively a like kind and quality replacement policy where they’ve got a minimum level that is paid in cash. Several of the homeowners companies have similar rules, especially for items where they are applying depreciation. The details are ALWAYS in the policy contract itself.

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

 

[diamondseeker2006]

My Chubb policy does not up the value of the ring. It just allows for appreciation of something like up to 50% over the insured value. I still pay the premium for the original insured amount.

 

[denverappraiser]

Different companies handle it differently and, for the record, I like Chubb although in some markets their premiums are a little high and they have a minimum purchase requirement that eliminates quite a few customers. Their approach is to have a declared value where they will pay full cash value in the case of a total loss. In partial loss cases, like a lost earring or a stone from an insured piece, they approach it the same way as most of their competitors by funding a repair up to the limit of the policy or cashing it out at full value and they get the salvage (for example the other earring). Like all of them, they apply pressure on the jewelers to do the repairs for a reasonable price and will not agree to pay a bill that’s seriously out of line with the market.

When the policies get even more similar is when you actually replace the piece after a loss. For this Chubb will allow a budget of up to 150% of the face value of the policy. It’s very much like a traditional replacement type program where you are given the opportunity to choose whatever jeweler you like to do the replacement but you are obligated to replace with ‘like kind and quality’. You can’t use this 150% program to upgrade. The opposite approach happens with most replacement policies but it leads to a very similar end. They usually WILL agree to cash out the policy, but the amount they will pay is based on their adjusters estimate of what it will cost them to actually do the replacement on the date of the loss, not the face value of the policy. Their preferred approach is for you to get the replacement from the jeweler and for them to pay directly at a discounted price. Depending on the appraisal submitted at the time of binding, this can lead to a serious disconnect between what the insurer thinks a piece is worth and what the insured thinks a piece is worth and this disconnect is the reason people are nervous about this type of policy. If the actual cost of replacement is MORE than the face value of the policy they will cash out and the insured is responsible for the shortfall. Obviously in all of these cases any deductible or copayment on the policy would apply.

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