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Update Jewelry Insurance to Reflect Rising Gold Prices

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Update Jewelry Insurance to Reflect Rising Gold PricesIn the past ten years, the price of gold has nearly quintupled and some experts are warning of another price bubble – one similar to the inflationary mania that impacted high-tech in the ’90s and the rise in residential real estate less than ten years after. Other experts are certain that gold has a strong position near $1,200 per troy ounce and could continue to rise into 2014.

While the dramatically rising prices for gold and other precious metals has helped many investor portfolios, it’s important to consider the impact on your jewelry. Adjusting your insurance to account for the higher prices is necessary – otherwise, you could be in for an ugly surprise if it has to be replaced due to loss or theft.

For those owning valuable jewelry collections, the price spike in gold has sparked an increase in prices of other precious metals, including silver and platinum. While most investors know the price of gold on any given day, they are far less likely to be aware of how the price of gold and other precious metals is affecting the value of their own jewelry collections. Gerald Escobar, principal of Asset Archives, recently indicated they had seen clients under-insured across all categories of valuable collectibles, including wine, fine art, antiques – and yes, jewelry. According to Escobar, clients who don’t proactively manage their valuables can be under-insured up to 40 or 60%.

  1. The first step in updating your jewelry insurance is to get an updated appraisal.
  2. Then, you’ll want to update your insurance coverage.

Update Appraisals

Clients need an updated inventory of their valuables if a loss occurs, and they should keep multiple photographs of their collections in a bank safe deposit box and at home. Accurate inventory record-keeping is vital to determining exactly what was lost and to obtaining an accurate claim settlement. An independent appraiser can be invaluable in determining current replacement value for your articles, including providing adequately detailed descriptions.

Update Coverage

With updated appraisals in hand, review your insurance policy to ensure you have adequate coverage. For exceptional items that were scheduled on a valuables policy, the value stated in the policy should be updated to reflect current replacement cost.

Top insurance companies offer valuables policies with a little extra protection for their clients, including:

  • Valuables policies with built-in buffers against market value appreciation. The additional coverage is a cushion in case market appreciation causes the coverage to be too low at the time of loss. For this buffer to be adequate, however, it must be periodically updated.
  • Valuables policies with built-in annual inflation adjustment. Of course, when gold prices are quintupling every ten years, their standard 2 or 3% increase simply isn’t enough protection. So, even with this protection, you’ll want to make periodic updates.
  • Some home insurance policies include higher sub-limits, such as up to $10,000 for jewelry, but these may still be inadequate if you own a gold bracelet originally purchased at $4,000 ten years ago, which is now appreciated to $16,000.
  • Many insurance companies allow grouping of similar valuable items, such as wine or art collections, to be covered under a blanket policy. With this approach, you would set a coverage amount for the entire collection without having to estimate the value of each and every item, making the overall policy easier to manage.
  • Valuables coverage also has the advantage of no deductible.

While you may need to increase coverage for your jewelry and other valuable items, you can manage the cost of your insurance by changing storage locations. It’s much cheaper to insure jewelry that is stored in a bank safe deposit box rather than at home. Clients with valuable jewelry that is infrequently worn should consider keeping those items at the bank. Use is on a limited basis, but that may well fit your needs anyway.

Finally, once you have updated your valuables coverage, consider scheduling a reassessment every three to five years as a rule of thumb.

The Fine Art of Planning with Collectibles

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