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.
AGREED
VALUE ( or sometimes called Valued At)
I only know
of two companies that offer this coverage... One is CHUBB and the Other
is Atlantic.
In an as agreed
type policy.... the company simply pays you the insured amount, providing
it is not grossly overvalued. I think Chubb is the best company for this,
and they are very lenient with writing checks for the full amount quickly
and without a lot of BS in the event of a loss.
If you can
get Valued at coverage DO SO its worth it. ( Incidentally, the cost is
not much different from the replacement type policy cost.)
_______________________________
IMPORTANT
NOTE:
There are
tremendous variances that depend on the policy, and the insurance company
filing of their policies and rates with each state's insurance commissioner.
One thing
for sure, they only are obligated to do what is stated in the policy and
not one dime more, and that is how most act.
I am not an
insurance agent, so you're own individual coverage and conditions should
be discussed with your insurance professional.
Avoid companies
that want to base the insurance amount at retail and only pay their cost
to replace.. Find a company that will write the policy at their cost and
pay their cost. This saves you insurance premium dollars.
SO one sure-fire
way to tell if you have a competent appraiser is that he discusses the
type of insurance you're buying as each different type of policy calls
for changes in the market from which the value is estimated, and the number
of markets that need to be reported so both the insurance company and
the insured can make informed decisions.
If you company
does want to charge based on retail and pay their cost, find out if your
state has an overpayment of premium rule.
If it does, if they replace at a lower amount than the face amount on
the policy, you are entitled to a refund of the difference between the
two amounts that you paid as premiums.
Florida has
such a law. California DOES NOT, and dumps that liability back in the
lap of the appraiser.
Also in Texas,
I understand that all insurance companies have to write valued at coverage
for jewelry.
Jewelry insurance
coverage is usually added by means of a separate insurance rider, to a
homeowner's or renter's policy. Chubb, State Farm and Jewelers Mutual
will write a policy for JUST the insurance.
Jewelers Mutual
however is one that insists on insuring at retail, and replacing the jewelry
at cost at the jeweler where you bought the items providing he is a Jewelers
Mutual "member".
Also be aware
that insurance policies require special conditions that must be met, if
there is a value dispute BEFORE you are allowed to take legal action against
them.
Also be aware
that almost all insurance policies REQUIRE the insured to disclose "ANY
MATERIAL FACT THAT AFFECTS THE RISK Of/For the Insurance Company"
One of these
material facts is paying less than you insure it for.
Uncredentialed
and Unqualified appraisers can cause huge problems when a claim occurs.
Under describing the item is about the most common one.
Intentional over-valuing is another.
ALSO AN APPRAISAL
SHOULD BE INDEPENDENT AND MADE AT WHAT THE LEGAL COMMUNITY CALLS ARM'S
LENGTH. THIS MEANS THAT AN APPRAISAL WRITTEN BY THE SELLER ISN'T A PROPER
APPRAISAL. IT TOTALLY SHOCKS ME WHEN PEOPLE ACCEPT THE SELLER'S APPRAISAL
FOR JEWELRY. THEY SURE WOULDN'T ACCEPT THE SELLER'S APPRAISAL WHEN THEY
BUY A HOUSE!!!! ( NEITHER WOULD THE MORTGAGE SOURCE)!
BUT YET WHEN IT COMES TO JEWELRY - ITS DONE ALL THE TIME AND EVERYDAY.
ANOTHER ISSUE
IS RELYING ON THE SELLER'S APPRAISER. THIS HAVE A DIFFERENT SET OF PROBLEMS.
THE APPRAISER YOU USE SHOULD BE HIRED BY YOU . APPRAISERS THAT ARE PAID
BY SELLERS, MAKE THE PERCEPTION OF ARMS LENGTH QUESTIONABLE.
If you're
appraisal is written in one paragraph or one page, it probably isn't worth
the paper its written on.
I could probably
write 15,000 pages on this subject.... but I won't..
however print
this out... and save it...
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