What You Need to Know About Insuring Fine Jewelry
Katie Tu is an insurance specialist at QuoteWizard. QuoteWizard helps consumers compare insurance quotes to find the best policy.
Imagine if your engagement ring was ruined in a house fire. Or the pendant that your great-grandmother cherished was stolen from your bedroom.
While no one wants to think about it, these tragedies could happen. But would your home insurance cover those losses? In many cases, your existing coverage isn’t adequate enough to compensate you for fine jewelry that’s damaged, destroyed, lost or stolen.
Considering that the average engagement ring cost nearly $5,700 in 2018, purchasing special insurance for your jewelry — as an add-on to your homeowners coverage or as a stand-alone policy — might be worth the investment.
What Does a Standard Homeowners Policy Cover?
A typical homeowners insurance policy covers jewelry, but only up to a point.
Under a standard policy, jewelry is covered for losses caused by any peril that’s included in your policy, such as fire, tornado or theft, according to the Insurance Information Institute.
However, the standard policy limits theft coverage for jewelry, since jewelry is easy to steal, the institute says. The standard policy has a low limit of liability for theft, generally about $1,500. So, in the case of an engagement ring valued at $5,700, your home insurer typically would cover just $1,500 (minus any deductible that your policy has).
What Are the Options for Increasing Jewelry Coverage?
If you own jewelry and other valuables, you can do one of two things to bump up your homeowners coverage, according to the Insurance Information Institute:
- Raise the liability limit. Even if the limit goes up, you still might not fully recover the value jewelry, though. For instance, a claim for a single piece of jewelry might be $2,000, while the overall limit for all jewelry losses might be $5,000.
- Purchase a “floater.” This option costs more than increasing the liability limit, but it offers more protection, the Insurance Information Institute says. A floater — essentially an add-on for your standard policy — covers any kind of loss, including those that your standard homeowners policy won’t cover; this includes accidentally dropping your engagement ring down the drain of your bathroom sink or leaving your great-grandmother’s pendant in a hotel room.
What’s Involved in Buying a Floater?
A floater covers “scheduled” jewelry, meaning that itemized, appraised pieces are covered for their full value. Before purchasing a floater (also known as a rider) to cover jewelry, a professional appraiser must assess how much it’s worth.
When you’re shopping for a jewelry floater, be sure to ask about “mysterious disappearance” coverage. This would, for instance, typically cover the value of your engagement ring if it slips off your finger while you’re swimming in the ocean. You know where the ring is — in the ocean — but you’re unlikely to be able to find it.
A floater also will cover an accidental loss. Let’s say your great-grandmother’s pendant falls off your blouse and is run over by a car. Unfortunately, the smashed pieces of the pendant can’t be put together. In this case, the accidental-loss portion of a jewelry rider usually would cover the value of the pendant.
One key benefit of a jewelry floater is that there’s no deductible. The amount you pay for a floater is based on the appraised value of the jewelry you’ve “scheduled” and the area where you live.
Keep in mind, though, that a jewelry floater costs more than boosting the liability limits in your standard homeowners policy. If you’ve got a substantial collection of jewelry, though, the extra price likely is worth it.
What Is Jewelry Protection Insurance?
If you don’t want to purchase a floater, you can look into buying what’s known as jewelry protection insurance.
This kind of insurance, separate from your homeowners insurance, is designed solely for jewelry. It covers the loss, damage or theft of jewelry; “mysterious disappearance” coverage can be tacked on. Coverage for jewelry repairs also can be purchased.
Jewelry insurance costs roughly 1 percent to 2 percent of the jewelry’s appraised value. It’s available from a number of insurers that specialize in this kind of coverage.
One of the most attractive aspects of jewelry protection insurance is that your premium won’t be hiked after you file a claim. This differs from standard homeowners insurance; following a homeowners claim, your premium normally goes up.
Although jewelry protection insurance might be right for you, it’s worth noting that it often doesn’t cover things such as wear and tear, floods and earthquakes.
If you file a claim with a jewelry insurer, it’ll be paid out in one of three ways: actual cash value, replacement cost or agreed value.
- Actual cash value (ACV) coverage involves a claim payout for the value of the jewelry, minus depreciation.
- Replacement-cost coverage pays your claim without taking depreciation into account. Therefore, the amount of money you receive will cover the cost of repairing or replacing the jewelry. The payout amount can be found on the declarations page of your policy; it’ll match the appraised value you obtained when you took out the policy.
- Agreed-value coverage refers to the value agreed upon by you and your insurer. The claim payout will equal that amount. While this likely is the best payout option, this type of coverage comes with a high premium. You can hold down the cost of the premium for jewelry insurance by increasing the deductible. But this, of course, means less money in your pocket when you’re paid for a claim.