Insuring jewelry: Value is in the eye of the policyholder

Michelle J. Lee

What could be better than seeing your significant other get down on one knee with a velvet box containing some bling-bling? One possible answer: Getting the engagement ring insured in case you lose it.

A recent survey by Jewelers Mutual Insurance Co. showed that more than half of the 600 respondents -- all of whom were married U.S. women -- reported having lost a valuable piece of jewelry. Beyond the regret of losing something expensive, nearly three-fourths of the women rated the loss as "emotionally jarring and upsetting," the company says.

Patrick Drummond, vice president of sales and marketing at Jewelers Mutual Insurance, says in a news release that not only does his company's insurance cover the monetary value of a piece of jewelry, it promotes the "protection of precious memories associated with special jewelry pieces."

More than two-thirds of the survey respondents who had lost a valuable piece of jewelry said it wasn't replaced because they didn't have insurance to cover the loss. Most of the lost jewelry was valued at less than $5,000.

A common argument against investing in insurance for your jewelry is that it's already covered by your homeowner's insurance or renter's insurance.

A standard homeowner's insurance policy with The Hartford, for instance, covers losses caused by perils that are named in the policy, such as fire or hail. While theft losses are covered, the coverage limit typically is about $1,500, though it varies by state, says Lisa Lobo, The Hartford's consumer insurance expert.

With the average engagement ring costing $5,200, according to the 2011 Engagement & Jewelry Survey by XO Group Inc., $1,500 covers less than 30 percent of the ring's value.

Jewelers Mutual Insurance's Perfect Circle Jewelry Insurance fully covers a loss caused by theft, damage or mysterious disappearance when the policyholder doesn't how or when the loss occurred). And unlike policies from The Hartford and other traditional insurers, "damage" under the Perfect Circle coverage isn't limited to things like fire or hail; instead, anything considered a "physical detriment" that reduces the piece's value is covered.

That's not to say that your homeowner's or renter's insurance can't adequately cover your jewelry. Standard homeowner's insurance typically offers special endorsements and riders -- additional coverage -- to insure certain pieces. These add-ons increase coverage limits in case of theft; furthermore, they cover mysterious disappearances of items.

"If repair is not possible, replacement is for 'like kind and quality'," Lobo says.

Perfect Circle provides "same kind and quality" replacements and also lets you choose the jeweler that you want to use. Both of these options are not offered by the typical homeowner's insurance policy.

Remember that under a typical homeowner's insurance policy, you're covered for named perils at what's known as "actual cash value" -- what it would be worth on the market, minus depreciation. If you want to be able to recover the full value of your jewelry without depreciation), you'll need to obtain a "replacement cost" rider to tack on to your regular policy.

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