If you received the gift of jewelry this holiday season, you may be wondering if you should insure it, and if so, for what amount? Since most homeowners’ policies have a special, lower limit for jewelry, it is important that you look at covering your jewelry separately.
Most new jewelry purchased from a retail store will include an appraisal and/or receipt along with a full description of the item. This documentation should be sent to your agent so the item will be added to your policy for the purchase price.

But what if you were given a family heirloom, inherited jewelry or don’t have a current appraisal? It is best to have fine jewelry appraised every three to five years. When going for an appraisal it critical to understand the three type of appraisals:

1. Estate – Estate appraisals represent the lowest value for an item and are for the immediate liquidation value, like cash for gold. They are generally used for tax and inheritance purposes.
2. Replacement Value – A replacement appraisal is a current market value appraisal.
3. Retail – A retail appraisal is the full price that you would expect to pay at a high-end jewelry store.

Here’s an example: A ring is for sale at a jewelry store for $20,000 (retail). You own the identical ring and lose it. Because the insurance company works with wholesale jewelers, it costs them $12,000 to replace the ring (that’s replacement value). Later, you need to raise immediate cash and try to sell it and are only offered $8,000 (that’s estate value).

Since insurance companies pay out on replacement value, it is important that you tell your appraiser the purpose of the appraisal. You want your jewelry to be replaced exactly as it is in the event it is lost or stolen, but there is no point insuring items for full retail, when they can almost always be replaced or recreated for less.