Is Your Jewelry At Risk? A Guide to Choosing a Professional Jewelry Appraiser
IS YOUR JEWELRY AT RISK?
A Guide To Choosing A Professional Jewelry Appraiser
© 1999 By Charles M. Ellias, GG, ISA, CAPP
Now that you have taken the time to choose the perfect gift, whether to commemorate a special occasion or just to wear and enjoy, is your prized possession properly protected? Unfortunately, the answer is probably no. This article will educate you on getting your jewelry properly appraised, including who is qualified to appraise your jewelry, what an appraisal should contain, insuring your jewelry, common misconceptions about jewelry insurance and how jewelry claims are handled. Since you have taken the time to choose the perfect piece of jewelry, I strongly recommend you take the time to read this article to protect your purchase.
How do I choose a professional appraiser?
This is actually a bit trickier than you may think. Unfortunately ANYONE may present themselves to the public as a personal property appraiser. Only real property appraisers (real estate) are licensed, which leaves it up to you to qualify the appraiser that you retain. This applies to all forms of personal property, but this article will focus on jewelry only. Because there is so much confusion about the jewelry industry regarding who is and does what we will start this guide with some different titles and definitions of those titles to help raise your understanding of the jewelry industry.
The professional appraiser
Working within the jewelry industry by buying and selling jewelry does not make one an appraiser, nor should appraising be treated as an inalienable right that comes with the job. Appraising is a profession, just as a doctor, lawyer, or CPA, where one must be educated and tested. Unfortunately, as of today, there is no overseeing body to administer government testing and licensing (just like dentistry before the American Dental Association was formed), therefore, anyone can hold himself or herself out as a personal property appraiser. BEWARE! It is up to you to separate the “quacks” from the professionals.
A professional personal property appraiser will have a high level of education backed with a high level of experience and product knowledge. A professional will have taken and passed courses and prescribed examinations in evaluation and valuation, principles and business practices, appraisal ethics, standards and report writing. This type of professional will also keep up with the standards and changes through rigorous continuing education. Membership held within a professional appraisal organization is a good indicator of the appraisers’ commitment to their clients.
However, please keep in mind that not all organizations are equal! Not all organizations requirements are at par with the levels and standards that are all too important today. First, you must ask the appraiser how their designations are earned. Some organizations give titles for just paying their dues! Ask them what their level of membership is within the organization and what it took for them to earn that level of membership. You will also want to ask how often they have to retest to maintain their level of membership and what the testing involves. Some organizations “grandfather” their members. Grandfathering means that they pass one test and never have to be retested. This is not acceptable an organization must retest its members at least every five years to ensure that they stay current and up to date in regards to changes within the profession.
Quack: Slang term for a self proclaimed “appraiser” with no proper or formal appraisal and gemological education or training. The “quack” also has a blatant disregard for “due diligence”, theory, methodology and, worst of all, their clients.
Jeweler (Bench Jeweler): Working within the jewelry industry does not make one a jeweler by default. A jeweler is a craftsman or artisan who has the ability and expertise to manufacture and, or repair jewelry. This ability comes from apprenticeship and, or educational institutions.
Graduate Jeweler (GJ): Same as above but the jeweler has completed all courses and passed all of the prescribed examinations of the Gemological Institute of America’s (GIA) manufacturing arts program.
Lapidary (stone cutter): One who cuts, facets, and or polishes colored gemstones or diamonds.
Lapidary Artist (gem artist): One who has abilities that go over and above a lapidary. These artists sculpt and carve gemstones along with being the most talented in the field.
Graduate Gemologist (GG): One who has taken and passed all courses and prescribed examinations (Theory and Practical) of the (GIA) Graduate Gemologist program. Should have the ability to identify and grade gemstones. This does not make one an appraiser or jeweler.
Fellow of the Gemological Association of Great Britain (FGA): One who has taken and passed all courses and prescribed examinations (Theory and Practical) of the (GAGB) FGA program. Should have the ability to identify and grade gemstones. This does not make one an appraiser or jeweler.
Horologist (Watchmaker): One who has been trained either by a school or apprenticeship and has the ability to manufacture watch parts, rebuild, and, or repair watches. Changing watch batteries does not make one a watchmaker.
Certified Horologist: Same as above but the Horologist has taken and passed all courses and prescribed examinations of an educational institution along with passing a state certification exam on theory and practical horology.
Watch Repairman: A person that can do basic watch repair, but has no formal education or training and has not passed any examinations. This is not a horologist.
Jewelry Wholesaler: One who sells to retail jewelers. There are a lot of retailers that misrepresent themselves as wholesalers. This is incorrect. A wholesale transaction is between a wholesale dealer, jobber or manufacturer to a retail entity for resale. A sale to the final consumer is a retail transaction. A true wholesaler would never sell to the public due to the risk of losing their wholesale accounts.Thought. If a person is dishonest about how their business is actually run, then how honest do you think they really are in regards to the product that they are trying to sell?
Jewelry Retailer: One who sells to the public (final consumer). The jewelry retailer takes on many different forms (e.g. chain stores, family owned stores, estate jewelry dealers, and discount outlet type stores). This does not make one an appraiser or jeweler.
Sales Associate: One who works as a sales person. This does not make one an appraiser or jeweler.
Beware of False Profits!
I have only listed a few of the titles that are out there within the industry. There are many different companies and societies that issue “titles” for paying membership dues or for sitting in on a few hour lecture and taking a less than taxing “exam”. If someone represents “designations” to you, then it is up to you to find out what they mean and how they were earned. Unfortunately there are a lot of people that hold themselves out as being “Certified” that are actually not certified in anything, other than holding a degree in BS, and I don’t mean Bachelor of Science!
I do not need all of those pieces of paper hanging on my wall, nor do I need to attend classes! I have been in the jewelry industry for thirty years.
If you hear statements such as the one above, I advise you to try to find another person to appraise your jewelry. It is this “Ignorance is Bliss” attitude that puts consumers and insurance companies in harm’s way, to the tune of millions of dollars a year, whether purchasing or insuring jewelry. A “base” degree is never enough. Continuing education is the only answer. Just one example is the changes in gemstone synthesis and enhancements. They are as continuously increasing as are changes to computers. Therefore without continuing education one is more than likely less than informed about current synthesis and enhancements, along with the guidelines regarding them.
How much does an appraisal cost?
As professional appraisers, we go through this scenario time and time again. When we quote our fees we all to often hear that “ I just talked to another “jeweler” and the appraisal was going to be $25 or free of charge.” I will caution you that these $25 “appraisals” are worth just that: $25. A competent professional appraiser will charge appropriate rates for the time and work involved to do the job properly. When you retain a professional appraiser, you are retaining a professional and must pay for that. When you hire a professional, you are insuring that your personal property assets are properly protected. Think about it: if you have a valuable item, one worthy of protection, then a proper appraisal will be worth much more than the appraiser will charge. The small premium you pay now is far less than what you will lose in aggravation, time, insurance premiums, and loss of dollars if you ever have an insurance claim and your appraisal was done by an unqualified appraiser. This also reduces the risk of having your claim denied due to misrepresentation of material fact due to a quack appraisal. On average, consumers pay an additional 40% per item, per year more than they should due to unqualified appraisers and appraisals.
How do you know if the appraiser is a professional?
Ask. All too often, the only question that is asked by consumers when trying to retain an appraiser is:”How much do you charge?” The question that you should ask is: “What qualifies you to appraise my property?” The professional appraiser will not be offended by this question, but rather welcome it. This is not as short of a question as it may seem, but it is rather a multi part question.
Listed below in order are the questions you should be asking.
Are you a Graduate Gemologist or a Fellow of the Gemological Association of Great Britain?
Are you a member of a professional personal property appraisal organization?
An example would be the International Society of Appraisers.
What is your level of membership within the organization? How did you obtain that level of membership? Did you have to take courses and pass a comprehensive examination, or did you just have to pay dues?
Remember one may be a member of an organization and yet may not have taken their courses or passed the prescribed exams. Other organizations have almost no educational criteria to obtain designations they just exchange “Dollars for Diplomas”.
How often do you have to take a requalification course and pass a requalification exam? What does the requalification course and exam consist of?
How many hours of continuing education courses do you attend per year? How many of these hours are appraisal specific and how many are gemological and jewelry specific?
Do you stay current on industry guidelines and research, along with local and federal laws?
What are your specialty areas?
Remember no one is an expert on everything. There are many types of jewelry. Here is a list of areas that may pertain to the type of jewelry that you may own and will want appraised, and you will want to know if they are qualified to handle it.
Diamonds: Natural vs. synthetic, modern cuts, old cuts (old mine, old European, rose, and transitional), fancy colored (natural vs. enhanced), Ideal cuts, and enhanced (fracture filled, laser drilled, HTHP color enhanced)
Colored Gemstones: Natural vs. synthetic, gemstone enhancements (fracture filling, heat treatment, glass infilling, deep diffusion treatment, coating, irradiation, paraffin coating, dye, and assembled stones. Note there are many more enhancements and the majority of gemstones on the market today are enhanced. You want to address how the enhancements will be reported within the appraisal. Rare colored gemstones, origin (the country of origin can play a major role in the value of the gemstone)
Pearls: Natural vs. cultured vs. assembled, freshwater or saltwater, (over the past two years, there has been a flooding in the market- place of Chinese freshwater pearls that mirror saltwater Akoya pearls and they can be worth a fraction of the price). Natural color v. dyed or irradiated, South Sea (white & Tahitian), American freshwater, abalone, seed, keshi, and mabé
Jadeite: Natural vs. simulants. “A” vs. “B” vs. “C” vs. “D”. ”A” jade is natural with just a wax finishing, “B” jade has been acid “bleached” and polymer impregnated, “C” jade has been dyed, while “D” jade has been acid “bleached”, polymer impregnated, and dyed. ” (a fine green one-inch “A” jade carving can be worth thousands of dollars while a similar looking “B” jade carving is usually worth less than a couple hundred dollars)
Metals: 9kt, 10kt, 14kt, 18kt, 20+kt, yellow v. white, platinum, rhodium, silver, gold filled, gold plated etc. Testing metals and manufacturing process (cast, hand fabrication, die struck, machined)
General jewelry: Mass-produced vs. custom, antique and period vs. reproductions and “married” pieces (period with modern parts and/ or converted pieces) modern, along with quality assessment. Enamels and inlays
Watches: Pocket and wrist, modern and period, condition analysis, authentic vs. fake or after-market parts
Hallmarks and Trademarks: Manufacture’s marks (a piece made by Cartier is more valuable than the same piece as an unknown)
Accessories: Compacts, chatelaines, cigarettecases and lighters
What equipment do you own and what will be used to evaluate my jewelry?
A microscope is usually never enough. Probably the biggest problem today is the use of “CZ” color master stones. You must never accept an appraisal that is done using anything other than a certified diamond master set containing at least five diamonds. A certified master diamond set is comprised of diamonds that meet specific criteria to be considered master stones. This does not mean that stones that have grading reports on them are master stones. According to the GIA Insider electronic newsletter: “Caution: Even though you have a diamond with a GIA Diamond Grading Report, you should never use it to grade the color of other diamonds. Remember that the diamond’s color is placed in a color range, and the report does not indicate where in the range it falls.”
It is imperative that you ask to see a copy of the master set certification. CZ color fades over time and the crystal structure and chemical composition is different and therefore the stones look different. Below is a list of equipment that you will want to ask about and every competent appraiser should have or have access to most of this equipment: Binocular 10–60x microscope with darkfield illuminator, fully corrected 10x triplet loupe, diamond light, pen light, long and short wave ultraviolet light, GIA certified diamond color master set, GIA gem set, GemDialogue, cultured pearl master set, fiber optic lighting, dichroscope, spectroscope, polariscope with interference figure sphere, refractometer, specific gravity fluids, methylene iodide, filters and lenses, Leveridge gauge, electronic Leveridge gauge or micrometer, electronic scale measuring carat, gram, and pennyweight, hydrostatic scale, proportion scope or proportion analyzer, thermal conductivity tester, moissanite detector, metal testing acids, camera, gemological, jewelry and watch reference library. A complete reference library is critical.
What type of lighting conditions will be used to analyze my jewelry?
5000–5500° Kelvin is the best lighting under which to grade colored gemstones.
How will you conduct the appraisal? Are you aware of the appropriate markets in which to valuate my property? (The appropriate market for a 1950 IWC wristwatch is the secondary market for watches of like kind, quality, and obsolescence not a year 2000 new IWC wristwatch). If you are not fully qualified to identify or authenticate an item, how will you handle it? Will you not appraise that one item, or will you consult an expert? If you use an outside resource will the item be out of your possession? Who is liable should anything happen to the item while it is in your possession?
What are your fees?
Fees should be based on a flat fee per piece or assignment rate, or should be based on an hourly rate. Fees should never be based on a percentage of the value or based on a predetermined outcome. Contingency fees are unethical and violate the ethics rules of any competent appraisal organization.
What standards do you conform to? Do you write to the guidelines of the organization that you are a member of? Can you show me what those standards and guidelines are?
If the answer is no to any of these questions, ask why?
What will my completed appraisal look like? May I see a sample? Will my appraisal have color photographs? Will there be archived negatives in case the photos are needed later on?
Are you willing to defend this appraisal in a court of law?
Do you have any references (past clients or colleagues) that can be contacted?
May I have a copy of your professional profile?
What should a proper appraisal contain?
Cover Document: This explains in detail what type of value is being sought, the appraisal objective (Purpose) and how the appraisal is to be used (Function). It will identify the client and intended users of the report and where the property was inspected, as well as the dates of inspection and the dates of value. It will explain the approach to value used and the markets explored. The standards to which the appraiser complies will be explained, along with any limiting conditions and other pertinent information not found elsewhere within the appraisal document.
Grading Systems: An explanation of the grading systems used for diamonds, colored gemstones and pearls.
Professional Profile: This is the appraiser’s history of education and experience. It lets you know how much education the appraiser has and how current it is. This is very important to see in writing. This part of the appraisal packet will really let you know where the appraiser stands in comparison with their peers. Make sure you ask for a copy of this prior to the appraisal and ask questions about the information contained within.
Body: This is the item specific area of the appraisal. It is critical that it is written properly.
Reverse: The back of the appraisal should contain lab work, photographs, and any other support material not found in the appraisal body or cover documents.
- Type of item (watch, ring, pendant, etc.)
- Gender (men’s, lady’s)
- Metal contents and type (14kt, 18kt, yellow, white, 950 platinum, 925 sterling silver, etc.)
- Manufacturing process (cast, die struck, hand fabricated or combinations)
- Metal finishes (high polished, satin, Florentine, hand engraved, etc.)
- Types of findings (box clasp, friction posts and nuts, mechanical pin, spring ring, etc.)
- Settings (6 prong platinum head, yellow gold bezel, bead set, etc.)
- Measurements (length, width, thickness)
- Item shapes (heart shaped pendant, knife-edge shank, round bezel, etc.)
- Metal weight in pennyweight or grams (gross with stones or net with out stones or non precious metal parts).
- Engraving (example: inside shank machine engraved in block letters ‘Sally Loves Johnny 1-25-95’)
- Circa (the age of the item, modern, 1915, 1965, etc.)
- Condition of the piece (excellent, good: slight wear; fair: heavy wear with some damage, etc.)
- Marriage (this pendant was converted from a ring, this brooch has had a bail added to be worn as a pendant, etc)
- Style number (if known)
- Manufacturer (if known)
- Signatures, hallmarks, and trademarks (if on item)
- Provenance (If it can be proven: this ring belonged to Queen Elizabeth. If it cannot be proven: this item was represented to the client as having belonged to the Duchess of York, but cannot be substantiated.) This should also include any supporting documentation.
- Family Lore (family legend has it that this ring belonged to great Aunt Helga whom received it in 1919 and was handed down to Sally in 1950, etc.)
- Photographs (archived negative numbers?)
- Shape (round, marquise, pear, cushion, etc)
- Faceting style (single cut, full cut, step cut, etc.)
- Physical measurements (Length x Width x Depth, when multiple stones not ten with a total weight of 1.00ct, but ten with a total weight of 1.00ct measuring three at L x W x D, two at L x W x D, and five at L x W x D.
- Proportions (for small stones (melee), a statement such as “proportions good” is fine. For larger stones you need table, depth, crown angle, girdle thickness etc.)
- Clarity (noting damage e.g. I1– chipped)
- Finish (polish/symmetry)
- Fluorescence (not needed on melee)
- Enhancements (laser drilling, fracture filling, etc)
- Plotting with plotting key (stones over 0.50ct)
- Inscriptions (e.g., report number 123456 inscribed on girdle)
- Stone type (ruby, jade, emerald, synthetic sapphire (including manufacturing process: e.g. fame fusion, Chatham flux, etc.)
- Shape (cushion, round, etc)
- Faceting arrangement (step cut, mixed cut, cabochon, etc)
- Physical measurements
- Clarity (using a recognized grading system)
- Color (using a recognized grading system such as GemDialogue) (e.g.: blue for sapphire is not descriptive enough; instead: Blue zone 80 with a 10% gray mask).
- Plotting with key (all major stones)
- Enhancements: Remember, over 90% of all colored gemstones on the market today are enhanced. Is the enhancement is known, or what is it believed to be, and what type of enhancement it is: e.g. fracture filling, glass impregnation, dye, bleaching, oiling, heat, diffusion, etc.
- Origin (if known)
- Phenomenon (description of phenomenon e.g. asterism (star), color change, and all given qualities of the phenomenon i.e.: 6-ray star, rays sharp, bright, straight, centered etc.)
- Carvings (description, content, quality, etc.)
- Natural, cultured, assembled, keshi, etc.
- Type (Akoya, freshwater, south sea, mabé, etc.)
- Size (6.0-6.5mm, 13mm, etc.)
- Shape (coin, round, off round, baroque, etc.)
- Color (white, cream, black, etc.)
- Overtone (rosé, green, gray, etc.)
- Nacre (thick, thin, etc.)
- Luster (high, dull, etc.)
- Blemishes (very slightly blemished, very blemished, etc.)
- Matching (good, fair, very good, etc.)
- Drilled (non drilled, full drilled, half drilled)
- Setting (peg, prong, strung knotted, strung unknotted, etc.)
- Enhancements (bleached, dyed, irradiated, etc.)
- Number of pearls
- Weight (grains, carats, grams, pennyweight)
- Type (strap, bracelet, pocket, pendant, etc.)
- Manufacture (Rolex, Waltham, Gruen, etc.)
- Style (Daytona, curvex, demi-hunter, chronograph, etc.)
- Metal content (gold, platinum, gold filled, titanium, steel, etc.)
- Finish (engraved, enameled, satin, high polished, etc.)
- Dial (color, hands, markers, signature, sub dials, date wheel, etc. Has it been refinished?)
- Crystal (lucite, glass, synthetic sapphire, etc; is it a replacement?)
- Crown (screwdown, push buttons, etc.)
- Bezel type (unilateral ratcheting dive, diamond- see above)
- Movement type and set (quartz, automatic, chronometer, mechanical, jeweled, caliber, lever set, pin set, stem set, 6 size, etc)
- Bracelet (type, integrated, measurements, etc.)
- Clasp (deployment, buckle, fold over with wet suit extension and safety, etc.)
- Parts (original, aftermarket replacements)
- Serial numbers (case, movement, etc.)
- Style numbers (case, brace, clasp, etc.)
- Circa (modern, 1980, 1930, etc.)
- Condition (excellent, good, refinished, repaired, worn, not running, etc.)
- Weight (gram, pennyweight)
- Inscriptions or engravings
Yet another fairytale… from the Brothers Grimm
Value, is not an abstract concept, as it is all too often treated by unqualified “appraisers.” Value is reported by, not set by appraisers. Value is set by market activity. In other words, if the mode (most frequently occurring commenced sale price) for a 1.00 ct. round diamond of a certain quality, within the defined marketplace is $5800, then the value of that diamond is $5800 and not $9000 (as some would like you to believe).
For example, if your house is appraised for $250,000 and three of your neighbors have recently sold their houses in the ranges of $230,000–270,000 for homes similar to yours, would you sell your house for $125,000? Let me rephrase the question. Do you think that someone is going to sell you a diamond that is worth $9000 for $5800?
The answer is no. There are bizarre mitigating circumstances when such a deal is to be had, but I will caution you now that they are few and far between and are never so dramatic, due to the low profit margins in diamonds.
It is best to find a jeweler who is honest and knowledgeable, someone with whom you feel you can trust and build a solid relationship. This will almost guarantee you will always get the best price possible. Loyalty goes a long way in the jewelry industry. When you hear these ads that state “the jewelry you purchase will appraise for double,” do you still believe them? The reality is the only thing that will double is your insurance premium. The selling price is probably exactly the true value. Feel good about your purchase, but don’t try to feel good about some fictitious, unsubstantiated, inflated dollar amount put on a piece of paper that only benefits your insurance carrier in the way of higher premiums.
A sad, but all too common story
With the exception of simple metal items (such as a plain gold bracelet), one-to-two line appraisals will only put you in harm’s way. Here is an example of a typical “appraisal,” one that is far too abundant on the market. “One lady’s 14kt yellow gold diamond ring. The ring has one 1.00ct round diamond, SI1 clarity, G color. Retail Value $10,500.”
Let me explain “Harms Way” with this alleged “appraisal.” You receive this paper and take it into your insurance agent to have the item scheduled (separately insured). It is typically written on some garbage boilerplate form with a fancy border and some ludicrous statement on the top, such as “we hereby certify we have been engaged in the business of appraising jewelry and watches for many years.” On the bottom is a disclaimer stating that they are not liable under any circumstances for anything.
WRONG! They are liable. They cannot, in the eyes of the court, absolve themselves of responsibility for their work. These appraisals would never hold up in court if challenged.
Your agent attaches a “rider” to your insurance policy for approximately $162 per year. The appraisal goes through the underwriting department and everything is fine.
Or is it? First, if you paid $6,800 for the ring, and that is what its appropriate value probably is, if they inflate the appraisal to $10,500, you are paying approximately an additional $60 per year in premiums that you need not pay and will never recover. That’s an additional $600 every ten years.
After you own the ring for a couple of years, let’s say you chip the diamond and so file an insurance claim. The claim agent will have the claim assessed by one of their replacement centers, which are jewelers who work on a heavily discounted rate with insurance companies, due to the large volume they handle for the insurance companies. If the claim center is handled by a competent gemologist-appraiser, there are a few different situations that may occur:
- Let’s say the damaged diamond was really an H color and could have been no better than an SI2 before damage. The insurance company has the right to cancel your policy at any time, based on the fact that you (unknowingly) fraudulently entered a legal contract and may refund your premiums on a pro-rated basis for the balance of the year. So you are left with a damaged diamond, one that no one else will insure, and a hundred dollars.
- Let’s say the grading was okay on the diamond, which you paid $6,800 for. The insurance company can buy the same stone for $5,600, so they will either replace it for you or give you a cash-out based on actual cash value (ACV; the insurer’s cost to indemnify or make you whole again) less any deductibles. This is the most common situation. This is also the most common method of claim settlement. Even though the insurance company can replace the diamond at a lower cost than you can purchase it for, your appraisal’s value conclusion must be set at the appropriate market level which is the consumer replacement cost.
- The diamond was completely lost, and due to this “wonderful appraisal” you have, which is all but useless, they only have to indemnify you based on the lowest common denominator. 1.00ct, SI1, G. Let’s say the replacement diamond is a poorly cut stone with whatever deficits it may have but it is 1.00ct, SI1, G. and it costs them $5,100. Your options may be taking that stone or taking the ACV.
You must understand why the insurance companies are handling these situations this way. The insurance industry is harmed to the tune of millions of dollars a year because of these so-called “appraisals.” You should also understand that this harms you as well. It is because of such situations that your premiums are at the level that they are.
Insurance company claim agents work to indemnify you as the insured, based on the quality of your appraisal, and the lowest common denominator, while at the same time protecting the company from the damage that is caused because of these “appraisals.” If you have a properly written appraisal, you are protected and have just raised the bar on the lowest common denominator. Now if you have a problem with an insurance claim, you will have a leg to stand on and will be able to be truly indemnified.
The most dangerous statement you can ever make is “I only need this appraisal for insurance; I do not want to pay that much to have an appraisal done. A jeweler down the street says he will only charge $35 and told me that would be all I need to insure the item.”
Keep in mind, no one ever realizes how bad their appraisal is until they have a claim, and 99% of all appraisals that I review for the insurance industry are not properly written. Those clients are greatly at risk. You will never see that $10,500 check that you think you will be getting, and that is stated clearly within your insurance policy (unless you have an agreed cash value policy, which most people do not). Always keep in mind that old saying: “An ounce of prevention is worth a pound of cure.” Or as I like to say: “Amputation is not fun.”
Protect yourself. It is always better to hire a professional now than to find out down the road that some of the most sentimental purchases you will ever make in your lifetime are not properly protected.
How often should I have my appraisals updated?
Appraisals for insurance are done in the present. This means that the value is written for the date of value stated in the cover document. You must have a properly written appraisal updated at least every two years to ensure there has been no damage and that the value is current. It is also prudent to have the same appraiser update your appraisals. The reason for this is twofold. First no one other than the authoring appraiser may make any changes to the appraisal document. Second, an update from the same appraiser will be at a minimal charge.
How should insure my jewelry?
Your insurance agent is most qualified to answer this question.
I will tell you this: there are two ways that you can insure your items:
- Scheduled. This is a separate policy based on each item and is the best protection. You should ensure you are covered for “all risks,” including fire, theft, damage, etc. Keep in mind that even though you may have “replacement cost coverage” on your homeowner’s policy, the appraisal will set your premium and your coverage limit on the scheduled item.
You can obtain an “agreed cash value policy” from some insurers that usually comes with very high premiums, in many cases making these policies unreasonable for most insured’s. This type of policy will pay out the appraised value as the settlement on a claim. This type of policy is best for items like antique and period jewelry and watches, one-of-a-kind pieces of lapidary art, gemstones that are no longer available on the open market, or custom pieces of jewelry created by a known artist that is no longer working.
- Unscheduled. This is covered under your homeowner’s policy. I caution you that the coverage is limited. It is almost never an “all risk” coverage situation. You must ask what the coverage limitations are. Also you need to know what the per-item limit and aggregate limit is within your policy. You will also have a deductible and will always be responsible for paying the deductible. Again, even though you may have “replacement cost” coverage, you will be limited to the per-item amount as stated in the policy. This coverage is most appropriate for items worth less than a couple of hundred dollars.
ALWAYS KEEP YOUR ORIGINAL APPRAISALS, LABORATORY REPORTS, AND PHOTOGRAPHS SOMEWHERE SAFE. MAKE SURE YOU KEEP THE ORIGINALS AND GIVE YOUR INSURANCE COMPANY A COPY, WHEN YOU GIVE THEM THE ORIGINAL, THEY MAY BE LOST!
Read, Read, Read, Read, Read, Read!
No one ever does, of course. I have said it numerous times and it is ignored. It is a symptom of the following malaise:
Americanitis – a common mental deficiency in Americans, one that either prevents them from reading a legal contract, or causes them to believe only what they choose to about that contract, before it is signed.
Sound harsh? Good, it’s supposed to. Read your personal articles policy application forms and policies. Insurance policies are legal contracts and you are bound to their terms and conditions. It is simple and is all spelled out. Almost all are the same and I will give you the wording off of one major insurance company’s personal articles application and policy, to better understand the coverage that you probably have on your “scheduled” jewelry. *NOTE: Again get a copy of your policy that pertains to your scheduled jewelry, read it and understand how you are covered.
The important part of this form, which is located in the signature block section reads:
I am applying for the insurance indicated, and the information on this application is correct.
I understand that the premium shown above must comply with insurance company name rules and rates and may be revised.
I also understand that insurance company name has the option of repairing or replacing any lost or damaged property. In the event of a cash settlement, I will be paid no more than insurance company’s name cost to replace the item.
Here it is. Here is where you contractually agree that you will be limited to actual cash value, which is the insurance company’s cost to replace the item, and not the appraised value. Remember, if the appraisal is out of date and the cost to replace is greater than the policy limit they will only pay out up to the policy limit. Also note that fraudulent misrepresentation of a material fact can null and void your policy at any time, including during a claim.
Important Personal Articles Policy Information
1. Non-covered Perils:
- Seizure or destruction under quarantine or customs regulations
- Any order or law of a governmental or municipal authority
- Risks of contraband, illegal transportation or trade
- Nuclear Hazard
- Insects or vermin
- Mechanical breakdown, wear and tear, gradual deterioration and inherent vice. NOTE: This is the big one! Technically they can deny your claim in a situation when you do not properly care for a ring (prongs do wear down over time) and you lose your diamond. That is why periodic inspections and maintenance are critical. They can deny your claim if you have an internally fractured gemstone that breaks, or if your stone is fracture-filled and the enhancement was not disclosed (a.k.a. inherent vice—a fault or deficiency within the item that under normal wear can be easily damaged or destroyed)
- Concealment or fraud. This entire policy will be void if, whether before or after loss, you have intentionally concealed or misrepresented a material fact or circumstance relating to this insurance. [Quality or value misrepresentation can easily apply to this]
- Loss settlement. We have the option of repairing or replacing the lost or damaged property. Unless otherwise stated in this policy, covered property values will be determined at the time of loss or damage. We will pay the cost of repair or replacement, but no more than the smallest of the following amounts:
- The full amount of our cost to repair the property to its condition immediately prior to the loss or damage;
- The full amount of our cost to replace the item with one substantially identical to the item lost or damaged;
- Any special limit of liability described in this policy; or…
- The limit of liability applicable to the property.
NOTE: Here it is once again, not to cram it down your throat… but this is the biggest problem with claims. Insured’s always want the dollar amount from the appraisal, but as you can see, you are contractually bound to this settlement.
- Loss to a pair or set. In case of loss to a pair or set we may elect to:
- Repair or replace any part to restore the pair or set to its value before the loss; or…
- Pay the difference between actual cash value [the insurance company’s cost to repair or replace, less any deductible] of the property before and after the loss.
- Loss Clause (lost premium clause). The amount of insurance under this policy will not be reduced except for a total loss of a scheduled item. We will refund the unearned premium applicable to such item after the loss or you may apply it to the premium due for the replacement of the scheduled item. NOTE: What this means is simple. After a claim you will get back pro-rated the unused portion of that years premium, you will not however get back the overage you have paid in premiums because of over-inflated appraisals.
- Appraisal. If you and the insurance company fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each will select a competent, independent appraiser and notify the other of the appraiser’s identity within (20) days of receipt of the written demand. NOTE: You can be assured that the insurance company will hire the biggest gun in your area. If you are wise, then the appraiser you retain will be better. I strongly suggest you use the qualification section of this guide to hire yours. If their appraiser is trained, then that person should know what type of value and date of values to use. Note that most appraisers do not do this. This is not an insurance appraisal, and the state laws and statutes apply. If your appraiser outdoes theirs, and theirs did not do the appraisal properly, you can have it thrown out.
The two appraisers will then select a competent, impartial umpire. If the two appraisers are unable to agree upon an umpire within 15 days, you or the insurance company can ask a judge of a court of record in the state of your residence to select an umpire. The appraisers will then set the amount of the loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss.
If the appraisers fail to agree within a reasonable time, they will submit their differences to the umpire. Written agreement signed by any two of these three will set the amount of the loss. Each appraiser will be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire will be paid equally by you and us. NOTE: You can circumvent all this grief and cost by having a proper, full narrative appraisal in the beginning! The rationale is simple. If you hold them to the highest standard in the beginning you have raised the indemnification bar. If the replacement does not meet all criteria of the original appraisal or is not a comparable substitute, then you will have a much easier time winning your case. Considering the quality of most appraisals today, a professional appraiser can challenge and shred the content and accuracy. This leaves you wide open for problems, unless you used a professional to begin with.
- Newly Acquired Property. With respect to jewelry, we cover newly acquired property of a class already covered. Coverage will not exceed either 25% of the insurance amount for that class of property, or $10,000, whichever is less. You must:
- Report this newly acquired property to us within 30 days of acquisition, and…
- Pay the additional premium from the date acquired.
- Intentional Acts. If you or any person insured under this policy causes or procures a loss to property covered under this policy for the purpose of obtaining insurance benefits then this policy is void and we will not pay you or any other insured for this loss
What do I do when I have an insurance claim?
- Contact your insurance agent.
- Gather and have ready your full appraisal and any supporting documentation.
- Find out what you need to do to help expedite the claim.
- Contact a qualified gemologist appraiser and make sure that they have all documentation needed to assist you with your claim. Your best bet is to contact an appraiser who also works as a claim center.
How will the insurance claim be handled?
- A claim adjuster from the insurance company, rather than your agent, will probably handle your claim.
- The objective of the claim adjuster is to indemnify you. This means to make you whole again in other words to put you back where you were before your loss no better and no worse.
- Most claim adjusters will go through a replacement center for their ACV figures. A replacement center is a jewelry store that works on heavily discounted prices for insurance companies. The prices that they sell to insurance companies are much less than you as a consumer can buy for due to the fact that the insurance industry is the world’s largest consumer of jewelry.
- It is up to you to qualify the replacement center. As the insured party, it is prudent that you make sure the person handling the replacement meets the same qualifications as the professional appraiser. How can a person handling the replacement truly indemnify you if they do not have the same qualifications to qualify the replacement item? (Refer back to the appraiser qualification questions)
- If it is not possible to use a replacement center with the same qualifications as the appraiser (most of the time it will not be possible). It is imperative that you arrange with your insurance company to have a qualified appraiser verify that you are getting truly indemnified. If the item is not a true indemnification, then you should ask to be reimbursed for your costs in having the appraisal done, and find a truly indemnified replacement.
- If possible, the best appraiser to qualify the insurance replacement is the appraiser who wrote the original appraisal.
For most consumers, the first item of jewelry they insure is a diamond engagement ring. Technically an engagement ring is a betrothal (promissory) item. This means that it is the property of “giver” but is possessed and worn by the “receiver.” If the two people do not reside together, there is an important issue that you must be aware of and address with your insurer. Insurable interest. Even though the “giver” has title, the “receiver” has the insurable interest. In other words, if a man gives a ring to his fiancé and they do not reside together, and it is insured under his policy and it is lost while in her possession, then it may not be covered. You must ask your agent if your policy will cover this situation. If they do not, the ring would have to be insured under the receiver’s insurance policy.
This article pertains to jewelry insurance appraisals only, but it is important to understand that the same philosophies apply to all types of jewelry appraisals. There are many types of appraisals, including estate, charitable contribution, equitable distribution and comparison for purchase, just to name a few. It is important the appraiser has the training, knowledge of markets and value definitions to handle these. While I have only addressed jewelry insurance appraisals, you may have antiques and collectibles, fine art, or machinery and equipment that you need appraised for insurance. The appraisal training levels pertain to these fields as well.
About the author: Charles Ellias is on the board of directors of the International Society of Appraisers (ISA). He is also a consultant for gem artists, lapidaries, wholesale diamond and gemstone dealers, insurance companies, retail jewelers, personal property appraisers, attorneys, independent adjusters, and consumers. He has taught courses on manufacturing arts, appraisal sciences, consumer courses on jewelry and gemstones, was a technical editor for Section III of the American Gem Society’s Advanced Personal Property Appraisal Course, along with instructing insurance companies and appraisers on jewelry appraisals and appraisal review. Mr. Ellias has authored numerous articles on appraisal issues, and has been the recipient of many awards for his dedication to the appraisal profession. With 20 years of professional experience, Mr. Ellias is an advocate for appraisal ethics, education and reform. For more information, see his North American Lapidary Laboratory website.