995. Laura explains how to protect your expensive jewelry or any new Valentine’s Day bling you received.
995. Laura explains how to protect your expensive jewelry or any new Valentine’s Day bling you received.
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With Valentine’s Day right around the corner, you might be expecting or even get surprised by a shiny new piece of jewelry. A listener named Laura sent an email asking about some bling she plans to receive.
Laura says, “I’m about to get engaged and want to make sure my new ring will be insured if something happens. My fiancé rents a condo right now, and I’ll move in with him soon. What can we do to replace expensive jewelry instead of taking a huge financial and emotional loss if something terrible happens to it?”
Congratulations Laura, and thanks for your smart question! This is Finance Friday, a special edition of Money Girl, where I answer your burning money questions. I'm Laura Adams, an award-winning author, on-camera spokesperson, female money speaker, and founder of The Money Stack, that's my Substack newsletter. You can sign up for The Money Stack and learn more at LauraDAdams.com.
Before I answer Laura’s question, I want to mention that this is episode 995, which means Money Girl has nearly 1,000 episodes! I can't believe it! To celebrate this huge milestone, I’m planning a special show to feature comments from listeners like you. I’d love for you to participate by calling 302-364-0308 and leave me a message, like a comment, question, or even your favorite money tip!
In today’s podcast, I’ll answer Laura’s question by reviewing seven critical tips for giving or receiving expensive jewelry. Taking a few steps can prevent a lot of heartache if something happens like it gets damaged, stolen, or mysteriously disappears. But even if you don’t receive any new bling this year, stay with me because it’s important to keep your existing valuables safe as well.
So I hope you use these seven tips to keep your precious belongings insured and safe.
1. Get a certified appraisal.
When you buy an expensive piece of jewelry, it typically comes with some type of appraisal. If not, it’s wise to purchase one from a gemologist that includes analysis, photos of your item, and an estimated market value. You might pay less than the market value, and your insurer needs to know precisely what they're insuring. Because of that, they may require you to get an independent appraisal to verify the value, especially for heirloom or estate jewelry. It typically must be a recent evaluation, such as not older than two or three years.
While your or your sweetheart’s great-grandmother’s wedding ring might feel priceless, insurers will only pay you up to the coverage amount you purchase, based on an appraised value–not on an item’s sentimental value.
The cost of an appraisal depends on the item. For example, an antique ring with many stones and old-fashioned gem cuts probably take longer to analyze than a brand-new diamond solitaire ring. It could take a gemologist weeks to complete an appraisal, and you want to make sure they have insurance during that time, if you don’t.
A simple piece of jewelry might cost a couple of hundred dollars to appraise, while something more complex could be $500 or more. You can find an appraiser by searching online or asking local jewelry stores.
2. Get insurance before buying something valuable.
Before you buy something expensive, like jewelry or a watch, make sure you have a plan to insure it. Think about how devastated you’d be if you bought your sweetheart a diamond ring and then lost it.
If you already have homeowners or renters insurance, find out how much coverage your policy includes for jewelry. Let your insurance company or the representative you're working with know what you’re planning to buy and how much it costs or a ballpark estimate, if you're not sure yet. They can help you increase your existing coverage or purchase a new separate jewelry policy, which I’ll discuss in a moment.
Now Laura said her fiancé is renting a condo, so he should have a renters policy. If not, this is the perfect time to purchase a policy that includes coverage for Laura’s new ring. I’ll explain more in a moment and give you recommendations if you don’t have a home or renters policy.
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3. Don’t assume you already have coverage.
If you assume that you have plenty of insurance for an expensive Valentine’s Day gift because you have a homeowners or renters policy, that could be a big mistake. The amount of insurance on your home and basic furnishings is different than the amount of coverage for many types of personal belongings, like jewelry.
Most standard home and renters policies include coverage caps for certain categories of belongings. For instance, jewelry and watches are typically insured for up to $1,000 or $2,000. Now if you’re a big spender, that could be a fraction of the cost of your gift.
For example, if you buy an engagement ring worth $8,000 and your homeowners or renters policy only covers $1,000 for jewelry, you’d come up $7,000 short of replacing it. Plus, the cap applies to an entire claim, not per item. So if you had multiple pieces of jewelry stolen, you’d only receive up to the policy limit.
Also, you must pay a deductible when you make a homeowners or renters insurance claim. So, if you have a $500 deductible and a jewelry limit of $1,000, the most you’d receive from a claim is $500.
Other types of personal belongings that typically have insurance caps include silverware, computers, firearms, musical instruments, collectibles, and antiques.
LISTEN ALSO: Home and renters insurance–5 things you should know
Next, I’ll explain how you can protect any special or valuable belongings.
4. Purchase an insurance rider.
If your existing homeowners or renters insurance doesn’t have a jewelry limit high enough to cover your posh purchase, one solution is to purchase additional coverage. That’s also known as adding a rider or an endorsement, or even “scheduling” your policy. All these terms pretty much mean the same thing. Scheduling means adding more detail to your existing insurance policy, such as one or more valuable items you want to exceed the standard coverage limits.
One benefit of scheduling an item, like jewelry, is that you’re covered for all types of losses. For instance, if you accidentally lose a wedding ring while you're swimming in the Caribbean Ocean on your honeymoon, you’re covered up to your limit.
Also, a scheduled item you insure with a rider doesn’t require you to pay a deductible! So that means you wouldn’t have to pay any amount out-of-pocket to replace a Valentine’s Day jewelry gift that gets lost or disappears mysteriously.
However, when your valuables are covered by a standard home or renters policy, without being scheduled, you typically only have coverage for specific events, like a loss from a fire or theft. Plus, a deductible applies, reducing the payout for any claims. So, be sure you understand the situations and the places where your coverage applies and how much that coverage will be.
While purchasing a rider does increases your insurance premium, it’s usually worth it. The cost might be $5 to $15 dollars per $1,000 of insured value. So, an engagement ring that’s worth $6,000 could mean paying an additional $30 maybe up to $90 per year on your homeowners or renters insurance premium.
5. Purchase stand-alone insurance.
Another option for insuring a precious gift is to get a stand-alone personal articles policy (PAP) that’s just for the item, not an add-on to an existing home or renters policy. Most insurers offer an articles policy for specific items, like jewelry, watches, furs, collectibles, and antiques.
Whether you own or rent your home, you typically pay less for an insurance rider than for a separate PAP. The only exception would be if you have many expensive items to insure. In that case, you'll probably come out ahead with the PAP.
In general, if your valuable belongings are worth more than let's say 10% to 20% of your home’s value, having a PAP is best. It may allow you to choose the level of protection, such as up to 150% of the agreed value if the item appreciates before you make a claim. Plus, it protects you home insurance rates from going up if you make a claim on your valuables. So, shop and compare both options, getting a rider and getting a stand alone policy, if you have a collection of valuables to protect.
Most homeowners have insurance, but most renters don’t buy a renters policy unfortunately. Please note that If you rent, a renters policy is surprisingly inexpensive. According to the Insurance Information Institute, the average renters premium nationwide is $171 per year. That's a bargain. So, if you rent, get renters insurance first, and then schedule an expensive item that's worth more than your coverage cap.
6. Gift recipients are responsible for insurance.
Many people are confused about whether the giver or recipient needs to buy insurance for a pricey gift. If you buy a gift to give someone, you need to have it insured while it’s in your possession. However, once you give a gift away, the lucky recipient owns it and must insure it.
Since Laura’s fiance is giving her an engagement ring and is a renter, I recommend that he purchase renters insurance and a jewelry rider, if needed. Insuring the ring is solely his responsibility until he gives it to Laura.
If Laura’s fiance already has renters insurance, he should review the capped jewelry coverage amount and be comfortable with it, or purchase a rider to increase the coverage amount. Or, as I mentioned if Laura and her fiance have many valuables to insure as a couple, they may want to purchase a separate PAP once she moves in with him.
If you’re already married or you're living together and you got the same home or renters insurance policy when you buy an expensive item for yourself or for your partner, you don’t have to take any extra steps, besides reviewing the coverage caps and making sure you're okay with it. But if you and your valentine have different households, remember that the person who wears and enjoys the gift must make sure that it’s insured.
7. Keep an up-to-date home inventory.
If you have home or renters insurance, but you don't have a list of your personal belongings, it could be challenging to claim a loss. Imagine that your home or apartment gets completely destroyed in a storm or a fire. Would you remember every single item that's inside your home?
So if you don’t have a home inventory, create one and add your Valentine’s Day gift to the list. You can start by creating a written list of your most valuable items, and also definitely take pictures and videos of all your belongings. Keep it in the cloud. Keep it in an external drive. Keep it in a couple of different places. The more documentation you have, the easier it will be to prove that you owned lost or damaged items and can make an insurance claim easily.
If you get engaged or receive some serious bling for Valentine’s Day, congrats! Now make it a priority to protect it.
That's all for now. I'll talk to you soon. Until then, here's to living a richer life!
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