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Not All Appraisals Are Really Appraisals

Most people receive a piece of paper when they make a large jewelry purchase that has a pre-printed form that says “Appraisal.” 

On that form, the seller often writes an inflated price for the item you just bought. That makes us feel good, as though we just snagged a “deal.”  There is no malice on the part of the jeweler as many of us believe market prices will inevitably rise and this inflated price will give the insurance company the information it needs to simply write us a check for that amount in case of loss. 

When I trained for my Gem and Jewelry Valuer credentials at the Appraisers International Society, I learned something crucial that I want to pass along to you. Here is an illustration.

You buy a diamond tennis bracelet that contains 5 carats of diamonds with a GH color and an I1-2 clarity. There are 40 stones in the bracelet, which is 14KT white gold. The store you bought it in has it marked at $17,500 but sells it to you for $8000. You get an “appraisal” that says it is worth $17,500 because that was the original retail price. You bind it on your insurance for $17,500 and pay your premiums based on that amount. One day, you are jogging outside and when you return home, you realize the bracelet has slipped off. After searching and searching, you conclude that it is lost and call your insurance company. There are two possible outcomes, depending on your policy.

If you have full value replacement coverage, you get a check for $17,500. If you have “replacement with new or like in same condition,” then your insurance company pays you what THEY determine it would cost in the marketplace. Insurers have a list of suppliers and they play  hardball for low pricing. Consequently, you get a tennis bracelet that retails for $3500-$4500. 

So all the time you paid into your insurance, you paid for a bracelet that had a “value” of $17,500, when, according to the insurer, at the time of loss, the bracelet was worth $3500 - $4500.

What to do? That’s next.