Insuring jewelry...protecting the priceless
Adjusters should understand the difference in coverage between homeowners policies and specialty jewelry insurance.
The jewelry market is expected to grow from $279 billion in 2018 to $480.5 billion by 2025, almost doubling in seven years. While the average cost of an engagement ring in 2019 was $6,350, many spend more on that for such a significant piece of jewelry. The presence of online jewelry sellers, such as Blue Nile or James Allen, make purchasing expensive jewelry easy, and Jewelry Television (JTV) makes buying less expensive jewelry even easier.
Loss claims
Jewelry is easily lost or stolen, and on the standard homeowners policy is covered for named perils only, with a limit of $1,500 for stolen property. The property can be scheduled for additional premium for open perils coverage, with wear and tear, insect or vermin damage, war, warlike acts, nuclear weapons, and nuclear hazard being excluded perils. This is not the only available option, however. There are specialty policies designed to cover only jewelry with staff trained in gemology who can work with an insured’s jeweler to replicate the missing or damaged piece.
Jeweler’s Mutual is one such insurer, which provides coverage for both jewelers and individual insureds. They stress that having a standalone policy will not affect an insured’s homeowners policy if the insured has a loss. That coverage is open perils, and they have a built-in insurance value adjustment to automatically increase the value of the insured property annually so that the coverage keeps up with the rising value of the jewelry. Jewelry often appreciates, seldom depreciating, so this is an important feature, reminiscent of inflation guard on the homeowners policy.
The standard homeowners endorsement for scheduled jewelry excludes wear and tear, gradual deterioration or inherent vice. Jewelers’ Mutual has similar exclusions but provides coverage for damage such as when a prong setting breaks or a stone cracks when a ring is knocked against a table. What is not covered is a gradual deterioration from scratches on the underside of a ring or inherent defects. This can be tricky since some stones are more prone to fracturing than others. If a delicate stone fractures, is that inherent vice and excluded, or is it covered damage? Does the insured have to prove that the ring was struck against something and broke, making it sudden damage and not inherent vice?
Documentation matters
A key aspect of any jewelry coverage is documenting the type of jewelry. The type of setting and the quality of the stone affect the value of the item, so an appraisal is required. However, not all appraisals are equal. A sales receipt does nothing to describe the jewelry purchased. Even a letter from the jeweler may not be sufficient, as many do not include all the details.
A document may state that the ring contains an F color, round brilliant, VS 1.00 carat stone. While that sounds complete, since it has cut, color, clarity, and carat weight, a key element is missing, and that is the detailed information as to the cut of the stone. Cut is beyond the shape; the shape is round brilliant, but the proportions of the cut make a significant difference as to how the stone is faceted; crown angle, table percent and pavilion percent make a difference as to the fire the stone displays. Two identical stones but with different proportions will have different values. For example, looking at two one-carat round brilliant stones, F color, good cut, VS1 quality with only two to three percentage points difference in cut vary in price by $577 at Blue Nile.
The Jewelry Insurance Standards Organization (JISO) has five forms available to industry professionals, certified appraisers and jewelers. The forms are available at jiso.org or jcrs.com.
The forms consist of two appraisal forms for use by certified appraisers, jewelers or gemologists to correctly identify and appraise the items; JISO 78 is for a single piece of jewelry, and JISO 79 is for up to two items per page.
The next form is the Jewelry Document for Insurance Purposes, JISO 806. It contains the same descriptive elements as the appraisals but is used by jewelers who don’t meet the training requirements for the JISO 78 and 79. It does provide the information necessary for scheduling items.
The selling jeweler uses the Jewelry Receipt for Insurance Purposes (JISO 805) to document the price paid for the item and its description, but it is not an appraisal. This is used for items of lower value where the underwriter doesn’t need an appraisal but a description of the item is necessary in event of a loss.
The Jewelry Appraisal and Claim Evaluation form (JISO 18) is used by an underwriter or claims adjuster to determine the adequacy and content of an appraisal submitted to underwriting or as part of a loss report. If the JISO 78, 79, or 805 were used, this form is not necessary.
The last form, JISO 154, is the Jeweler’s Inventory Record and is a manual recording system providing standardized item descriptions and it helps with appraisal preparation. It tracks inventory location and status, and pieces comprising several inventory items such as a sapphire stone surrounded by diamonds.
Protecting one’s investment is important, and insuring it properly is key. While jewelry can be scheduled on the homeowners policy, someone who has had a homeowners claim or two might do well by insuring the jewelry separately so that jewelry claims do not affect the homeowners policy.
Christine G. Barlow, CPCU, (cbarlow@alm.com) is managing editor of FC&S Expert Coverage Interpretation, the authority on insurance coverage interpretation and analysis for the P&C industry.
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