Most people find that buying insurance is part of their diamond shopping experience and there are quite a few companies that offer it. It’s helpful to have a basic understanding of the options. These comments are very general in nature because each insurance policy is different from the next. Both terms and rates will vary with the nature of the policy, the company selected, your location and credit history, etc. In every case, the actual policy that you agree to will become the rules and it’s important to understand what it says. Read it. Some of this can be learned by talking to the agent, some by talking to the company with their 800 numbers but the real answer is to read the policy.
For the majority of US consumers, there are 4 basic approaches to the insurance question.
Homeowners insurance usually includes certain coverage for losses to personal property, including jewelry. They will normally have some aggregate amount of property that is included in coverage that is based on the value of the house. For example, if you live in and insure a $300,000 house, you may get coverage of an additional $100,000 for the contents. There will be some restrictions on how much of this can be jewelry and there are usually some limits on how much value can be concentrated into a single item. A typical policy would allow for $5,000 in jewelry with no more than $1,000 in a single item. Most homeowners policies have coverage for losses due to fire, theft, and any other problems but are inclined to limit your coverage for loss, damage or “mysterious disappearance”. All of these limits, along with the deductible, are negotiated when you write your homeowners policy and you should discuss your coverage needs with your agent to get the policy that best suits your requirements.
Riders are additional insurance that is bought along with your homeowners or renters policy to cover certain items that otherwise might be uninsured. Jewelry, especially engagement rings, often falls under this category. It is, in effect, a separate policy for that item issued by the same company at the same time. A common strategy is to select the most expensive items from your wardrobe, especially anything over the single item limit in the homeowners policy and buy a rider for those items. The remaining items can be insured under the aggregate rules of the main policy. The coverage for items with a rider is usually better than the coverage without and often includes “all risk”. This means that it’s an insured loss as long as it wasn’t purposeful by the insured.
Stand alone policies
There are several companies that offer individual policies for jewelry without the requirement that you have a homeowners or renters policy issued by the same company. These are sometimes available from the same companies as your homeowners but, more often they are issued by specialists in this. There are several national firms that issue these but they don’t all do business in every state. The coverage is normally similar to what you get with a rider to a homeowners policy in that they usually cover “all risk” and they may have a deductible involved.
Many jewelers and manufacturers will offer warranties on their products and on their work. As with the independent insurance contract, it’s important to read the terms of the warranty for the specific details.
Most manufacturers will guarantee against defects in their products for a certain period of time. If a part falls off due to a manufacturing defect, they will repair or replace it free of charge. They do not usually cover consequential damages. This means that if the head falls off on your ring, and it was their fault, they will replace the head and reset the stone for free. It usually does not mean that they will replace your lost diamond! Do not count on a manufacturers warranty for this type of coverage unless you are absolutely certain of the terms of the guarantee.
Many jewelers also offer warranties on the items they sell. If you buy an item from a certain store and go back to that store for periodic inspections, they will guarantee it against a whole variety of things, including the kind of losses that the manufacturer won’t cover. Sometimes these are included as part of the original deal and sometimes they are added on as an additional sale. It’s usually necessary to go back to the same store, or another one in the same chain, and have a warranty card marked to indicate your inspection. It is usually also necessary to buy your ongoing maintenance from that store whenever it’s recommended by the inspector. Naturally, these policies don’t cover loss or theft of the piece and there is normally exclusion for “customer abuse”, which is a poorly defined term at best. Sometimes the fee for this coverage is included in the original price and sometimes there is an extra charge but the jewelers that offer this type of policy are always anxious to talk about them.
Defined Value vs. Replacement
Within the above general groupings, there are two basic varieties of policy: Defined Value and Replacement.
Replacement policies are where the company agrees to replace or repair the property in the case of a loss. This is the most common style. If you file a claim, they will send you to a local supplier who will get you a replacement piece based on the description that was included when you wrote the original policy. This comes from the appraisal that you submit to them at the beginning. If you are unhappy with their choices for suppliers, they will allow you to go elsewhere but they will only pay the amount that would have been necessary to pay their chosen source. If you can get it cheaper than that, you get the extra money and if you want to spend more, you must pay the extra.
Defined Value policies are where you agree in advance with the company how much will be paid in the case of a loss. This can be done with an appraisal or with the original sales documentation. In the case of a total loss, the company will cut you a check for the full defined value. Payout in the case of a partial loss (for example a lost stone) will depend on the details of the company and policy chosen but the most common approach is for the company to pay for repairs using a contractor of their choice.
Replacement policies are offered by most of the major US insurance companies and are sold both by agents and by the company directly. The big players are:
- State Farm Insurance
- Allstate Insurance
- Jewelers Mutual Insurance
Defined Value policies tend to be a bit more restricted on what they will cover and are usually about twice the price but they are fairly attractive because of the way claims are handled. Here are a few sources:
- Fireman’s Fund
- Lloyds of London