Diamond Ring Insurance Guide
Buying a diamond ring is a major investment. They can vary in price from a few hundred to tens of thousands of dollars depending on the size and quality of the diamonds. It seems counterintuitive that a faceted hunk of carbon formed deep in the earth’s crust could be so valuable!
Why are diamonds so expensive?
• The cost of mining. Diamonds can be extracted by digging a pit, boring underground, alluvial (lakes and streams) or marine (ocean). Some scientists speculate for every one carat of diamonds you must sift through 200-300 tons of rock/dirt.
• Quality diamond rough is hard to find. Most diamond rough is used in industrial applications. Only a small percentage is usable for jewelry.
• Faceting. Once you extract gem-quality rough it must be examined and then faceted by an experienced lapidary.
• Selling to sight holders. Typically, the general public cannot buy faceted diamonds directly from a lapidary. Gem quality diamonds are sold to what is known in the industry as “sight holders.” A sightholder is a company on the De Beers Global Sightholder Sales's (DBGSS) list of authorized bulk purchasers of rough diamonds.
• Retailers and Manufacturers. The final destination of gem-quality diamonds are retailers and manufacturers. They purchase diamonds from sight holders to mount in jewelry or sell loose.
• Marketing. The final expense in a diamond's journey is marketing to the end user (you the consumer).
Now you have a better understanding of why diamonds are valuable and expensive. A diamond is marked up at each one of these six levels.
The Four C’s
In order to have a uniform method of accessing value to a gem-quality diamond, gemologists (experts in diamond and gem grading and identification) developed the 4 C’s of diamond grading (color, clarity, cut and carat weight). The lack of color in a white diamond (brown, yellow and grey undertones) increases its value. The more internal inclusions (usually minerals) that can be seen under a ten-power loupe or microscope the lower the value. The highest percentage of value is ascribed to cut. A well-cut diamond returns light to the eye efficiently and effectively. Scintillation, brightness and fire and all terms to describe this process. For instance, fire is when white light is broken up into spectral (rainbow) colors. Carat weight is the easiest way to determine value because it is the least subjective of the four. You can weigh a diamond on a scale. In diamonds, once you hit the one carat mark, the value goes up exponentially because larger gem-quality diamonds in higher grades are rarer.
Do I Need To Insure My Diamond Ring?
Now that we established a basic understanding of how diamonds are valued and why, we can then ask the question, do I need to insure my diamond ring? The answer is both yes and no. Before I worked as a jewelry appraiser, I sold insurance. Most homeowners and renter's policies offer riders to insure expensive individual jewelry items. There is usually a minimum amount of blanket coverage up to $2500 for all your jewelry in case of fire or theft. Some policies will cover “mysterious disappearance” (you lost it and looked everywhere). If you have a single piece of jewelry worth more than the minimum coverage, you can purchase a rider to cover the replacement cost of your item. Your premium is based on an amount per thousand dollars of appraised value. Example, you have a $10,000 engagement ring. The insurance rider cost is $1.00 for every thousand dollars. So, your monthly premium would be $10.00. This example is for illustration purposes only and does not represent an actual policy.
In order to insure your item, you must have an appraisal. Currently, there are no Federal or State licenses required to call yourself a jewelry appraiser. However, the jewelry industry does have minimum evaluation standards. Most jewelers with some basic gemological training can write an appraisal for new jewelry they sell. Appraising estate (pre-owned) jewelry requires more advanced training.
• National Association of Jewelry Appraisers (NAJA). There are six levels of membership. Candidate Member, Member, Senior Member, Certified Member (C.M.), Certified Senior Member (CSM), Certified Master Appraiser (CMA). najaappraisers.com
• American Gem Society. C.G.A. (Certified Gemologist Appraiser). https://www.americangemsociety.org/membership/credentials/
Both of these organizations require extensive training - either a GG (graduate gemologist diploma from the GIA) or an FGA (Fellowship of Gemmologists Association based in Europe) along with courses on ethics and evaluation.
The Most Common Types Of Appraisals.
• Replacement Value. This is the most common appraisal method. The item’s replacement value is tied to the current retail price.
• Fair Market Value. This appraisal can be used for estate (pre-owned) jewelry. The criteria is based on what two reasonable people (not under pressure) would agree is a fair price.
• Liquidation. When a piece of jewelry is sold because of a death or other financial hardship, a liquidation appraisal is used. The liquidation value is the lowest of the three.
Insurance Companies That Only Insure Jewelry
Like with any other insurance, it is a good idea to shop around for rates and the reputation the company has in paying claims in a timely manner. Jewelers Mutual is one of the most reputable and affordable companies which offers policies to individuals and businesses. www.jewelersmutual.com
When an individual does not insure a piece of jewelry on a policy, they have chosen “self-insurance”. If they suffer loss for any reason, they are responsible to replace the item out of their own pocket.
The Choice Is Yours
Buying a diamond ring typically marks an engagement or some other significant achievement or anniversary. This creates an emotional attachment to the ring. It is also a significant financial commitment. Deciding to insure your precious item against theft, fire or mysterious disappearance is an important decision. If you have money to burn you probably will self-insure your jewelry. For the rest of us normal mortals, purchasing the right insurance coverage is a prudent move.
This article has attempted to give you an overview of why diamond rings are valuable and educate you on your insurance options.