Keep your appraisals, insurance on fine jewelry up to date, Glowing in value

December 9, 2010

By Tim Grant,
Stacy Innerst

The average price of gold jewelry has more than tripled in the past 10 years, which means if you haven't reappraised that Rolex watch or the heavy 18K gold necklace you've owned since the dawning of the new millennium, there's a good chance it's underinsured.

"Gold, platinum and silver are up," said Janece White, a vice president at Chubb Group of Insurance Cos. in Whitehouse Station, N.J. "Most of the metals that fine jewelry is made of have gone up. We are talking about exponential increases in prices."

In the Past 10 years, the spot price for a troy ounce of 24-karat gold has surged from about $280 to a record high this week of $1,431. This year alone, the price of gold has appreciated 25 percent. Silver is up 68 percent. Palladium is up 70 percent, and platinum, which now costs about $1,700 an ounce, is up 12 percent this year.

Losing a gold or platinum ring at today's prices is not exactly chump change for most people, which is why having current appraisals and insurance on jewelry is more important than ever.

A homeowner's policy offers limited protection, usually including theft coverage up to $1,000. It does not usually cover damage or loss of all or part of an item. Many people are reluctant to tap their homeowner's policy even for a stolen item of jewelry, since it could mean losing the policy or ending up with a higher premium because of the claim.

A better option would be to "schedule" jewelry on a homeowner's policy. It will cost a higher premium but, at the end of the day, provide better coverage for personal valuables.

Jewelers Mutual Insurance Co. is the only insurance company specializing exclusively in jewelry policies in the U.S. and Canada. The company does not require individuals to have a homeowner's policy in order to insure their jewelry.

"We suggest getting reappraisals on your jewelry once a year," said Mike Maley, vice president of Jewelers Mutual in Neenah, Wis. "We also will clean it for you and look for potential damage, such as loose stones, bent prongs and damaged prongs.

"It's similar to having the oil changed in your car. It's something that should be done on a regular basis."

The important thing to understand with most personal items policies is many insurance companies do not pay cash to loss victims.

Jewelers Mutual's policies only will repair and replace jewelry for the insured amount, but Mr. Maley said the advantage is that policy owners get to pick their own jewelers for the repairs or replacement. Some insurance companies require all repairs and replacements to be done by their preferred jewelers.

"The majority of customers want the item replaced or repaired," Mr. Maley said. "We will give you something different if you don't want the same item, but we are not going to give you cash."

The idea behind the "no cash provision," he said, is that paying cash for lost or stolen items lends itself to more potential for fraud.

He said the majority of claims are for jewelry repairs rather than loss. The majority of the $3 billion worth of new policies the company writes each year is for engagement rings and wedding bands.

And while it will insure items of any value, the average policy for individuals is valued between $5,000 and $6,000 for a total of 2.2 items.

Unlike most insurance companies, Chubb Group not only pays cash for lost or stolen jewelry, but its policies also have a built-in inflation protection that insures items for 150 percent of their value. For an item insured for $1,000, Chubb would pay up to $1,500 cash if that's what it costs to replace the item today.

"With a lot of carriers, you would not even get the $1,000 you insured the item for," Ms. White said. "The company would send you to a jeweler it chooses to replace the item and the jeweler would have to work within a budget.

"Our concern is to make you whole financially and you determine what to do with the money. You may decide you want a different style or look if something happens to the jewelry you insured."

Insurance policies, like the one offered by Chubb, that pay cash are preferred by people who see their fine jewelry items as a form of investment.

Greg Marshall, CEO of Global Asset Management, a precious metals wholesaler in Hollywood, Fla., said that in countries such as China and India it's very common for people to buy high-quality gold jewelry for investment purposes.

"Gold and silver is money," said Mr. Marshall, author of "Good As Gold: Protecting Your Future With Precious Metals." "It's been money for 5,000 years.

"In all of history, not one fiat paper currency has ever survived gold, and gold has never gone to zero. It's always worth its weight."

Jewelry items that have appreciated the most in value are heavy gold chains because gold jewelry's value is based on its weight and precious metals content, according to Kitty Litman, owner of Coin Exchange on Sixth Street, Downtown.

Pure gold carries the "24 Karat" stamp. But jewelry is rarely made of 24-karat gold because the metal would be too soft. Gold jewelry is usually mixed with other alloys, such as nickel and copper, to make it more durable. The highest quality jewelry typically is 22K, followed by 18K, 14K and 10K, which has the lowest gold content.

Ms. Litman said just as the spot price of gold has increased fivefold over the past 10 years, the price of most gold chains has increased fivefold, too. The price of other jewelry items with less gold content has at least tripled, she said.

Diamonds, on the other hand, have decreased in value, Ms. Litman said, because there is a glut of diamonds on the market now.

"I don't even carry gold chains anymore because they are so expensive," Ms. Litman said. "It got to a point where the melt value of the gold chains I had in my shop was just as high as the retail price.

"I sold the gold chains I had for scrap and I haven't replaced them," she said. "They are just too expensive. People don't want to pay all that money."

These articles are provided for informational purposes only and were obtained from publicity available sources on the Internet. These articles do not constitute financial advise or trading recommendations by Global Asset Management ("Global"). Global neither warrants the accuracy or completeness of the information contained in these articles, undertakes to update them, nor is it responsible for any omission or error contained in these articles. Viewers are encouraged to conduct, and should only rely on, their own independent research.
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