Insurance for Jewelry

Besides being portable, personal jewelry has two other unique problems: Items are usually small and easily lost, and jewelry often can only be valued under a microscope. Jewelry is also subject to two policy limitations;

  • A dollar limit for theft – usually $1,000 per claim – not a limit per item
  • No coverage for the loss of a stone from its setting (a very common claim)

For managing the dollar limit on theft problem, the strategy of raising the dollar limit on jewelry coverage is available from most insurers, usually to a limit of $5,000 to $10,000. Insurers vary, but common pitfalls of this strategy include:

  • No broader causes of loss being covered.
  • A per-piece limit of $1,000 to $1,500.
  • The burden of having to prove the value of what you lost – very difficult to do with unique jewelry. If you can’t prove what you lost, you’re vulnerable to the insurance company replacing what you lost with a lesser-quality item or gem.

The insurance company normally replaces your gem with another gem, instead of cash. This claims practice significantly reduces the number of fraudulent claims for “stolen” jewelry.

The strategy of scheduling jewelry items works better because

  • Almost every accidental claim – including the loss of the stone or even the loss of the entire piece – is covered.
  • There’s no deductible.
  • An appraisal is required to schedule an item, so there’s no dispute over what you lost. You simply take the most recent appraisal to the jeweler who is doing the replacing. She uses the appraisal to closely match what you lost.

The only negative of scheduling, besides the cost and hassle of getting an appraisal, is the danger of being under-insured if the value of your jewelry increases. You can protect yourself by updating your appraisals and increasing your coverage limit every three to five years. Out of scores of jewelry claims, I’ve only had two clients get paid less than the appraised value; in both cases, their appraisals were over ten years old.

If you’ve had a piece of jewelry insured by the same insurance company since the original appraisal was done, you can call the jeweler who did the appraisal and request an updated value. You don’t have to prove you still have the piece because it has been continuously insured.

The strategy of buying the special-perils causes-of-loss coverage option is only partially effective for jewelry. Though it broadens the kinds of loss covered, it doesn’t help with the dollar-limit problem.

I find non-insurance strategies – avoid, reduce, or retain – very helpful when it comes to personal jewelry risks:

  • Avoid the risk for seldom-worn jewelry that you eventually want to pass on to your kids. Pass it on now, while you’re still here to enjoy them enjoying it – and the risk now belongs to someone else.
  • Retain (self-insure) smaller jewelry items – especially those you won’t bother replacing if anything happens to them.
  • Reduce the risk to your jewelry by putting expensive, seldom-worn pieces in a safe-deposit box. Reduce the risk of the loss of stones from their settings by regularly having the prongs checked.

There usually is no way to transfer the risk to someone other than through insurance.

The burglary risk is reduced significantly when you install a central burglar alarm. Hide expensive pieces to further reduce the risk – the first place the burglar looks is in your jewelry box. If you hide it, don’t forget where you hide it.

My recommendations for managing your jewelry risks are:

  • Retain the small stuff – especially items you wouldn’t replace.
  • Schedule items worth $1,000 or more – especially those you would replace. Don’t forget to add sales tax to the value of the item.
  • Add up the values of the items under $1,000 that you would replace, if you want them insured, and then raise the jewelry dollar-limit high enough to cover those items, or to the maximum available from the insurance company. When you talk to your agent, impress her with the technical name for this: blanket unscheduled coverage. Still get appraisals for the unscheduled jewelry items you’re covering under the blanket coverage and store the appraisals off-premises. The insurance company won’t require an appraisal from you at the time you buy the coverage as they will for scheduled items, but being able to prove what you lost will greatly enhance your claim settlement.
  • Store pieces you seldom wear – especially heirlooms – in a safe-deposit box. Insurance can only pay cash. It won’t begin to replace the sentimental value of your treasures.
  • If you have a lot of jewelry, reduce the burglary risk by hiding it and/or adding a central burglar alarm. Consider installing a safe, but be sure it’s part of the building (built into the wall or in the floor, covered by a rug).