Should You Insure Your Diamond Ring? There’s a Rider For That.
Pull up your homeowner’s insurance policy and follow along! In addition to replacing your dwelling in Section 1 Part A, your policy covers your personal property in Section 1 Part C. This includes coverage for your furniture, clothes, and electronics in the event of a covered loss. This coverage is usually a percentage of total dwelling coverage– somewhere around 50 -70%.
Renters need personal property coverage, too! Read about Renters Insurance Basics.
However, if you have a single item of jewelry, collectible or art that is over a particular threshold for your policy –somewhere around $1,000 – $2,500, then you need to get an insurance rider for this item if you wanted to have it insured. A rider is an insurance policy provision that adds or amends benefits to your insurance policy. If you had a rider for your jewelry, this would be listed under Additional Coverages.
Updating Insurance as Asset Values Increase
As the years go by, the value of your ring, or other personal property that you’ve insured individually through a rider, may increase. You would need to adjust the value of the ring with a new appraisal to have the proper insurance coverage in case it was lost or stolen. A good rule of thumb is to have your item reappraised every 3-5 years. Insurance covers only up to the insured value, so if you lost the ring and it was under-insured, the insurance wouldn’t cover the full amount to replace it and you’d pay out of pocket for the difference.
One personal example of this under coverage is a loss that my dad experienced. He had a fancy watch which he wanted to give to my brother after he passed. Unfortunately, the watch was stolen, and when Dad went to his insurance agent to file a claim, he discovered that when he got the rider for the watch, it was only insured for $2,500 whereas now the replacement value was over $10,000. What was he to do? He could file a claim on his stolen watch and receive the $2,500. That’s it.
Understanding Your “Why”
When you go to get something appraised, the appraiser should know why you are getting the appraisal. The value you’d see for an appraisal for insurance purposes is based on the replacement value at retail prices, so it will give a higher value than an appraisal to determine the fair market value. The fair market value appraisal determines the value if you were to sell it in its current used condition. Note that the age of the item doesn’t factor into the value, but an appraisal does list all the important details describing the item. For example, for jewelry, it could describe the gemstone weight, quality, materials or markings. But just because you have a diamond ring doesn’t necessarily mean you need to insure it. Not everybody insures their rings and watches.
A review of your insurance riders is another good reason to look at your insurance policies on an annual basis. Similar to my dad’s situation where he didn’t have the watch anymore, if you’ve sold or otherwise disposed of property you had a rider covering, call your insurance agent so you stop paying for the cost of the rider. For the property you still own, make sure those insured values are updated. Just make it a habit to check your policy annually!