Over the past five years, gold prices have jumped nearly 50% and silver prices more than 27%. Diamond prices have gone up too, as have some other gemstones. But that hefty increase in value could cause problems if any of those baubles and bling are lost, stolen or destroyed, because they could be drastically under-insured. Indeed, this issue prompted one reader to ask MarketWatch Picks what consumers can do to make sure they’ll receive an insurance check that covers their entire loss if something happens to great-grandpa’s gold watch or that striking set of 18-carat earrings.
“My wife and I have several pieces of expensive jewelry covered by a rider attached to our homeowner’s insurance, which required us to obtain a certified appraisal. We did, but that was several years ago and the jewelry probably is worth a lot more now. Do we need a new appraisal and how often should we get one? Our insurance company hasn’t said anything on the topic.”
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According to the experts we asked, it pays for owners to make sure their jewelry is properly valued. Otherwise any insurance pay-out is likely to come up short when it comes to covering the value of any items you lose. Here’s what you need to know.
Jewelry is typically covered by your homeowner’s insurance. Most policies automatically cover between $1,000 to $2,000 of jewelry, along with your roof, water heater and all the rest of your home and its contents. If your jewelry is worth more than that built-in limit and something happens, you’ll be reimbursed only up to that limit. To avoid that problem, jewelry or other expensive valuables should be covered by an insurance rider, a separate addition to your policy that will cost you a bit more. To get that rider, your insurer requires you to get a qualified appraisal.
These riders, by the way, are used to insure all kinds of valuable items you keep at home that won’t be covered by your general contents coverage. That includes coins, firearms, art, antiques and other collectibles. Those items also will need to be valued with qualified appraisals. Items placed on a rider are called “scheduled property.”
But if the market for any of that scheduled property takes off, you’ll need to get a new appraisal and update your policy, said Doug Heller, an insurance expert with the Consumer Federation of America.
“The approach a homeowner should take with any high value property — including their home itself — is that they should monitor the market for similar items as best they can to assess replacement value of the object and get a reappraisal if the market seems to have moved the value beyond the currently insured value,” Heller said.
You may also want to check your policy’s details to see exactly where your coverage limits fall, said Kara Klotz, Communications Manager for the Washington State Office of the Insurance Commissioner
“All riders offer different coverage and policy limits,” Klotz explained. “Some policies base their coverage on the item’s appraised amount at the time you purchase the policy. Some policies pay for the item’s stated value or agreed value. Most policies will pay up to the limit covered in your policy.”
Klotz gave this example: If your rider stipulates the coverage limit on an item is $1,000 based on your appraisal, that is the most you’ll get, regardless of how the value may have changed. If your policy covers the replacement value of your item and the insurance company can find a replacement for $800, the policy would pay only $800, regardless of the appraised value.
The bottom line is that it’s up to you to make sure your scheduled property is accurately valued in your policy rider.
And even though some insurance agents or companies will send a questionnaire about personal property to assess your coverage, it’s typically every five or 10 years.
“Ultimately, it’s your responsibility to make sure your insurance coverage is adequate to meet your needs and the best way to do that is to have a conversation with your agent or company,” Klotz said.
As with all insurance questions, your best first step is to get in touch with your agent and check your coverage limits, conditions and, most importantly, any exceptions. If you suspect that your valuables are under-valued, find out what kind of appraisal your policy requires, send in the paperwork and hope that – like any insurance coverage – you never have to use it.