RE: Insurance..
Insurance companies are similar but yet different. There are three types of basic policies ( depending on your state and the company this also varies).
All policies covering diamonds are Marine type insurance policies. I know this sounds strange but this is how they work.
ACV ( Actual Cash Value)
in the event of a loss the item is replaced by the insurance company at the current cost to replace less depreciation. ( Not that common for jewelry, but there are some states that this type is written.)
REPLACEMENT
This is the most common type of insurance available. The appraisal amount represents two results.
1) It sets the LIMIT regardless of anything, that the company is obligated to pay.
2) It establishes the amount upon which your premiums are based. The rate varies from location to location. The more dangerous your area is, the higher the rate.
Most insurance companies can replace the stone for less than you paid for it, and at best at the same price.
If you insure the ring for $20,000. and they can replace it for $ 6,000.00 based on the description, then that would be what they would pay to replace the item. If you ask for a "cash out" - then they pay you the estimate given by their replacement source.
I have a huge disagreement with those who leave off this highly important value in insurance appraisals for THIS type of coverage.
Appraisals should state ALL the relevant information, but unfortunately very few appraisers seem to understand this concept.
They feel that reporting the insurance company's cost to replace would only anger consumers. However since the cost of the premiums paid by the consumer, are based on the valuation(s) most consumers would be outraged to learn that they overpaid their premiums for YEARS!
The amount that the item is insured for is NOT for anyone to decide but the insurance company and the client. The appraiser should have NO determination of deciding which value the item should be insured for.
Some companies base their rate on retail, and pay cost. Others will accept the lower value, and pay just that.
Using the insurance company cost to base the insurance coverage amount is very sensible and saves premium dollars, however, markets change and since these values are for close to what the item would cost, they have to be updated when there are changes in the marketplace.
You can't let an appraisal get too old that you're using for insurance if the value is sensible. Many argue that stones are always appreciating... BUNK! They vary and some do go up, but others also go down.
Your mentioning about getting paid for cost increases is untrue in most states for this type of insurance. MOST INSURANCE COMPANIES DO NOT OFFER "INFLATION GUARD" on replacement policies.
Also carefully check with your agent about the type of policy as they are very different. HO is the most common series.
