Gold Prices Are Rising. Is Your Jewelry Properly Certified?
Gold prices continue to break records, rising above $5,500 an ounce this week with no sign of stopping. If you’re not buying gold bars at Costco or investing in a gold ETF, you might think this rally isn’t that big of a deal.
Your jewelry box begs to be different. If something happens to an important ring, bracelet or other piece of jewelry, rising prices for precious metals make it more expensive to replace — even if you have homeowners or renters insurance.
Although homeowners and renters insurance policies offer protection for your jewelry, there are important caveats. A typical policy will only pay if the jewelry is stolen or damaged in what’s called a covered peril, such as fire, and the maximum payout is usually $1,000 or $1,500 per item. Filing a claim doesn’t make economic sense, especially with the growing number of homeowners who are increasing their deductibles to $5,000 or $10,000 to offset increased capital costs. Also, standard installation will not replace your most expensive parts; A typical engagement ring, for example, contains about a quarter of an ounce of pure gold, which means that the standard policy coverage won’t even cover the cost of unrefined gold to replace it.
If you want better coverage for an important piece like an engagement ring, experts recommend adding a rider to your homeowners or renter’s insurance or taking out a separate policy specifically to cover one or more pieces of jewelry, which can provide higher coverage and protection against loss.
Even if you’ve taken this extra step, however, experts advise that you check your coverage to make sure you’re still adequately protected. According to Sherry Smith, vice president at Edge Retail Academy, a consulting firm that trains jewelry retailers, a large increase in the price of gold can leave you exposed.
“Higher gold prices have widened the gap between insured values and the actual cost of fine jewelry replacement. Many customers remain overinsured due to outdated tests, which creates financial risk,” he told Money via email.
Silver jewelry lovers also face the prospect of higher prices; The price of silver has jumped more than 200% in the past year, riding a trend that has seen the precious metal rise in value in recent months.
How to insure your jewelry
The first step is to get your jewelry inspected. Experts recommend getting valuables such as jewelry inspected annually, although many people don’t. Even if you follow this advice, the recent rise in gold, silver and platinum prices means that a one-year appraisal will not capture the current replacement value of your piece.
Once you know how much your valuables are, you can determine the best strategy for protection. The least expensive route is to increase the limit on your current homeowners or renters policy, although this option has some important limitations: You can expect to still have a relatively low cap — say, $2,000 instead of $1,000 — and you’ll still be limited to claims resulting from covered perils, such as theft or fire. (If the ring falls off your finger, you are out of luck.)
Depending on your homeowners policy, you may be able to attach a rider (also called an endorsement). Riders provide coverage for valuables such as jewelry, which is a higher level of coverage than you would get with your standard homeowners policy. Although the details of the policy vary, the rider usually provides comprehensive cover – such as protection against loss and theft. The drawback, however, is that filing a claim can cause your homeowner’s insurance premiums to increase the next time you renew. (This is also taken into account when raising your coverage limit.)
The most comprehensive option is a separate, independent jewelry policy. This covers you if your jewelery is lost or stolen, including while traveling overseas, and offers higher limits that will pay the full replacement value of your gold jewellery. Although more expensive – if you want to insure an engagement ring, you can expect to pay 1% to 2% of the appraised value of the ring per year – this option offers you a higher level of coverage. Also, filing a claim is unlikely to affect your home insurance premiums, making private insurance especially attractive if you live in an area prone to natural disasters.
More from Mali:
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Gold Prices Can’t Stop Breaking Records – Even As Stocks Fall
