Welcome to the GuiltTrips podcast. I'm your host, Kendra Lockhart. As a goldsmith and
gemologist, I'll be speaking 24 carat on all things jewelry, metals, and gems. Join
me plus a few friends to demystify both materials and designs as your private jeweler. Let's
tune in on these topics and get golden. One of the conversations regarding jewelry that either I
have to initiate or gets asked of me is about ensuring the ring. In today's talk, we're going
to break down exactly what it is and isn't, how a jewelry policy gets created, what happens when
you need to make a claim, and how the game of jewelry insurance gets played from their end,
a jeweler's experience, and of course, you. The point of this episode is to help you get informed
and have a big picture idea regarding the experience and architecture of insurance so that you can
truly choose if this is something that makes sense on a piece by piece basis. What is jewelry
insurance for? People end up buying policies after they've acquired a piece of jewelry,
whether they had it made, purchased it, or inherited it to protect against three things,
damage of the piece, loss of the piece, or theft of the piece. If all three of those are covered
in a policy, then it is considered comprehensive coverage. Jewelry doesn't need a specialized
policy. Sometimes homeowners and renters insurance will cover it. I'll explain later the pros and
cons of going that route. My stronger experience is with a separate jewelry policy. So how does
one begin with ensuring jewelry? Either you're working with an agent or you're working with a
company. Jewelry insurance for a consumer is different than that for people in the industry.
When I was carrying diamonds, when I was a courier or running people's projects down,
we had what was called block coverage or I was bonded for certain amounts. So an example of
that is I could carry up to $50,000 in diamonds. The block coverage was usually to ensure a store
and had a maximum dollar amount with specifics as far as stop gaps or preventative measures that we
had to take in order to legitimize our claim. Obviously, if there are supposed to be two
employees at all time and only one of us was there during an incident, that's going to void the
coverage. What is needed in order to have a policy created is an appraisal form. That comes from
somebody like me, a gemologist who has done in theory some research on a piece, like I said,
purchased, created or inherited as far as what it would take for retail replacement value. That
means walking into a store and having a duplicate item of similar specs, identical stones, same
metals and materials and techniques and what that would cost. Obviously, sometimes inflation is
part of this. So that's why we tend to encourage people who want jewelry coverage, get your appraisal
looked at every couple of years. If somebody had their ring insured from 20 years ago, that's not
really going to give them a contemporary idea of what it would take to buy the same piece again.
Once there is some sort of documentation by somebody who is an accredited jewelry professional,
that document is then forwarded to either the agent or the company. Those parties are going to
take a look at what the total is, pretend it's $10,000. They're going to calculate a percentage
of that value. And then they're going to use a multiplier in the case of the jewelry insurance
that I use called locational risk factor. Being in Chicago, there's a lot more crime. So my multiplier
is higher than if I was in a more rural area. I have the choice of paying all at once for an
entire year of coverage. We're breaking it down monthly, depending on who the insurer is. Sometimes
I also have choice as far as do I want zero deductible, 5%, 10%, or in situations such as
homeowners insurance or renters insurance, the deductible is a flat dollar amount instead of a
percentage. One thing I like about working with jewelry policies nowadays is that the ring is covered
from the moment of the policy creation. So that means I'm usually having a lot of my clients once
we know that the ring is almost complete, we're getting ready to set a delivery date, I will have
them start their jewelry policy and know that coverage is already active by the time they come
to pick up the ring. So it's protected as they're taking it from my studio back to their home or
safety deposit box or a parent's address for storage situations like these. So what happens
when you need to make a claim? There are two types of claims. To repair the ring. This means
that a stone like an accent diamond has fallen out or the head got crushed or caught on something
and is out of alignment. So what usually happens when a ring is needing repair is that there's a
UCR which is the usual and customary rate. Of course demographics come into it. Insurance
companies take a pooling of low to high price things. They come up with some sort of composite
average on what they believe this repair should cost. Let's say that the stone that's lost is
a two point stone and they've allotted $100 towards this. This means that either that repair is going
to get reimbursed, you'll pay your hundred dollars, you'll pick up your ring, you'll make a claim
and insurance will send you $100 back or they may choose to work with the jeweler directly.
In cases like this it's often incentivized for us to do it for less than that $100 coverage.
How would we do that? Sometimes we've got a stone that's been recycled or has been used in some
other project and pulled out. So that's kind of a cost saver. Perhaps we let the junior jeweler
work on the project at a lower labor rate than somebody with advanced skills. If the repair price
exceeds the coverage then that's out of pocket. You're paying the difference or you're going to a
jeweler who's in part of the network. One of the reasons I didn't love jewelry insurance with
homeowners and renters policies such as state farm is they have a list of jewelers they want you to
go to a network. Back in the day you would get approached by a state farm agent and asked if
you wanted to be part of the network. They would say we're going to send you this type of client
and it'll help you build your client base. Spoiler alert the people coming in to have their ring
repaired are extremely unlikely to want to patronize your store or begin buying your creations.
Not that it's impossible but they're there for very very transactional restoration of something
they've already put a lot of money into. The beauty of having jewelry insurance is it saves you the
doing it yourself of having to figure out where to go, how to get the materials, the negotiating
of what needs to be done as somebody who may not be educated about the process, and it is a third
party. The insurance is going to monitor not just your claim but how the jeweler is executing the
repair. So for a lot of people like most service-based industries there is a convenience factor,
there's an ease of life factor, and there's a peace of mind factor.
Now let's get into the other type of claim loss or theft. Let's say that the ring is extremely
damaged. In real life example a client's ring slipped and fell down the garbage disposal
and it absolutely destroyed the mounting. She was able to get the stone back or theft.
Your contractor came in, you stepped away for a moment, they pocketed your engagement set,
you weren't paying attention, and now it's too late. There are two ways that can go when you
make that claim. Do you want to have it cashed out and just say I'm fine without a ring or do
you want them to replace what you've had? Should you choose replacement? Several policies will work
with jewelers to find a stone that is as identical or nearly identical to what you had. Let's say
you had a one carat diamond that was around cut and it was H color and it was VS2 clarity,
they're going to look for that stone. One of the challenges is if you had an extremely well cut
stone but it wasn't certified, there's no lab saying so. As long as they get a one carat round
H VS2, they've contractually done their part to replace what you had as a center stone given
the majority of specs. If a mounting like the previous example is damaged beyond repair,
then a new one must be made. This is often a mutual decision with communication between the
insurer and the jeweler as far as what constitutes it being quote unquote totaled out. Can it be
salvaged and repaired and still be structurally sound enough to be worn with a peace of mind for
the next five years? If not, jewelers are going to discourage that which does not rule out insurance
companies saying, hmm, we're not interested in paying for a brand new ring. We still believe that
this one can be reworked, restored and continued to be used. So one of the stories from the world
of insurance through the eyes of a goldsmith like me is the financial tipping point. If you've
insured your ring year after year after year after year, and you've been diligent and you've kept it
in great condition, you're never going to get to the point where your insurance is as expensive
as the ring. That's one of the major fears that I deal with with clients. What if I end up buying
a second ring just an insurance loan? Let's pretend the ring is $10,000. Your insurance policy per
year annually is $300. It's going to take 33 years for you to get back up to the original purchase
price. One of the things that insurance companies do have the right is right of refusal. There are
certain items that are uninsurable because they are too complicated or too rare to put in a policy.
One of my clients found a red diamond and had it made into a single stud earring.
The ability for an insurance company to locate even internationally or worldwide,
another three-quarter carat red diamond, is so rare I haven't even seen one in museums.
It was refused as far as coverage.
Insurance will not help you with any sort of manufacturing defects. So if there was a faulty
join on the ring from a jeweler's torch, that's on the original makers. If the casting had a lot
of porosity and ended up cracking or breaking, again, that goes back to the primary source
of the ring. Insurance will not help with that. So it's important to understand that this isn't
universal and they're not just going to be the genie in the lamp, you know, call them up and
they'll just fix everything. There are a couple different ways that the financials go when it
comes time to replace an entire ring. There's the actual cash value, which is fair market.
There's replacement cost and we've used the word retail, which is obviously a very different
pricing system. And then there's an agreed value. Sometimes you get paid out and sometimes the
jeweler gets paid out as we've discussed. The final element worth discussing is the responsibility
of the ring owner if there is a theft. It is strongly encouraged that a police report gets
filled out. It legitimizes the claim and it also brings compliance into the situation. Now what
does that mean? It means that the police are going to take the report and run it through databases.
Compliance is where anybody who acquires a diamond in the secondary market, such as a pawn shop,
a consignment company, a jeweler who buys over the counter, you have to hold the item for x number
of days for any report of it missing to match up. Now how often is stolen jewelry recovered?
Sadly, there's a 2% recovery rate. However, within that 2%, compliance does what it's supposed to do.
I had a colleague who bought a three carat diamond 10 years ago over the counter. Someone came in
and said, I want to sell this. They agreed on a price that was attractive to both the jewelry store
and to the seller. Within a week, the police came and confiscated that diamond purchase.
It had been reported stolen and there was absolutely no recourse whatsoever. She was out the $17,000
that she paid for it. And this could have been avoided if, one, it was taken on consignment
and said as soon as it clears database, we'll pay you out. Just leave it with us for the two weeks
that it might take. Or if there was a time, like now, that you can run those numbers and get an
answer within minutes instead of weeks. So obviously, advancements have been made and when this did
happen, that wasn't the case. It wasn't a possibility to get that information in real time.
It is not mandatory to ensure your jewelry. And there are plenty of people from all walks of
socioeconomics who choose to avoid covering their pieces, whether it is because it's perceived as
an unnecessary expense or it's not in the budget. Or privacy is also a factor.
There are people who just don't like the idea of insurance companies knowing what assets they do or don't have.
So to wrap up, is this protection? In many cases, that's true. Is this all
so for profit? It certainly is that way when it comes to having your items covered for repair,
even though the offset is convenience, time saving, peace of mind, and being referred to a local
specialist, as well as the money that gets saved, the money that is saved, the money that is saved,
and being referred to a local specialist, as well as the money that gets saved and made if
lesser quality diamonds are used to replace a loss claim or if a mounting is salvaged versus remade.
This is the extent of my expertise on helping guide my clients as far as which decisions to make
regarding their personal pieces. Thank you for listening and learning with me.
I would love you to share this project with people finding rare beauty in today's world
and throughout our times. Until the next episode, keep your own stories sparkling.