Replacement Value: When less REALLY is More

Jessica   •   January 17, 2014

Inflated values are all too common on most jewelry appraisals, and it usually the result of pressure from jewelers and even the consumers themselves on appraisers to inflate the value of their item. This practice is actually not in the best interest of the client, and can cost thousands of dollars over the years in excessive insurance premiums and can even contribute to the risk of having a claim denied.

For example, let’s say you purchase an engagement ring for $12,000 and have what you perceive as an accommodating, generous appraiser value it at $24,000. You will then end up paying premiums on an extra $12,000 per year that you need not pay and will never recover, and these premiums will only increase with time.

After you have been paying premiums for a couple of years, let’s say that you chip the diamond and file an insurance claim. Most insurance companies work with high volume/low cost replacement centers. These jewelers offer special discounted rates to insurance companies because of the amount of claims they process.

Jewelry insurance typically costs $10 per year per $1,000 insured.

If the claim agent then finds out that there is no way, even before the damage, that the diamond could have matched the value or quality specified in the appraisal, then the insurance company has the right to cancel your policy at any time, based on the fact that you (albeit unknowingly) entered into a fraudulent legal contract and may refund your premiums on a pro rated basis for the balance of the year. At that point, you will be left with a damaged, now uninsurable diamond, and a refund of a couple hundred dollars.

This is why it is important to have a properly written appraisal with a reasonable, conservative replacement value. Insurance companies will have no problem accepting an appraisal and collecting your premiums, but in the case of a claim they will not hesitate to call foul and wiggle out of their obligations if they find a way. Obtaining an accurate, professional appraisal is completely YOUR responsibility as far as they are concerned.

So, you see? In the case of jewelry appraisals, this is a situation where less really is more.