With inflation running at a 40-year high, Gemcorp is daily getting calls and questions from clients asking if they need to have their jewelry re-appraised. As cliché as it sounds, our answer is most often, “It depends”. Let’s dive into that answer a bit.
According to Forbes Magazine, jewelry sales “went through the roof” during the pandemic period starting late 2020 into mid-2022. According to Bureau of Economic Analysis (BEA) data, the personal consumption of jewelry reached $94.6 billion in 2021, up over 50% from the $62.3 billion spent in 2020.
Leading the pack during that time seemed to be fine watches, due in large part to no increase in production (supply) by most major manufacturers, a strong secondary market (increase in demand), new sources of and amounts of disposable income for consumers. We saw more new fine watch sources for the consumer during the pandemic, including retailers, online firms, flippers, and “get rich trading watches” infomercials. All contributed to a run-up in prices that have since plummeted. Many people used that time to update the values of their jewelry and watches to have appropriate insurance coverage.
Beginning mid-2022, there has been a steady drop (there are always exceptions) in the prices of secondary market watches. Since mid-2021, there has been no significant change in the price of gold, though it has a persistent ebb and flow toward and away from the $2,000 per troy ounce level. The price of both natural and lab-created diamonds has continued to drop throughout 2023. All of this is good news for the jewelry consumer because prices are down. Especially with the troubles going on in the world, it’s anyone’s guess what the next 6 to 12 months and beyond will bring.
Now to address the “it depends” answer. Most consumers have their jewelry appraised to obtain insurance coverage. The first bit of information that every consumer should know is how your particular insurance company handles a claim. Generally speaking, there are two ways; it is important to know what coverage you have, and any limitations stated in the policy.
Replacement Value Coverage
The most common coverage is “Replacement Value.” In the event of a loss and using an adjuster, the insurance company finds the lowest price for a like-kind-and-quality item. This becomes your claim settlement amount and is often less than the purchase price or the appraised value, but you are once again “whole”. Adjusters have special relationships with vendors outside of the consumer retail market. Your premium and the maximum limit of their liability is set by the appraised amount, the claim is often settled for less. Especially with a Replacement Value policy, you want to make sure the value stated is not above the current actual market value. Otherwise, you will be paying much more premium than you should.
Agreed Value Coverage
Less common is “Agreed Value” coverage. Not every company offers (most do not) these policies and they generally have a higher premium than a replacement policy. However, in the event of a proven loss, the insurance company pays you directly.
So, “it depends” if your appraised values reflect the present state of the market. If you are insured for prices at the peak of the market, a re-appraisal will reduce your annual premium for either type of policy. If such an item was acquired at a higher than present market value, it may not feel so good that you are experiencing a “loss” from your purchase price. If your policy is reflective of prices of over 5 years, a new valuation is recommended… it just depends!