Is insurance value evidence of a bargain?

posted in: Appraisals, Diamonds | 0

Is a high insurance appraisal evidence of a bargain?

This is the heart of the appraisal question for a lot of new purchase clients.  They bought a diamond or piece of jewelry, they paid a lot of money for it, and they want to know how they did.  They want evidence of a bargain. The seller, of course, said it was a great deal, and maybe it was, but that’s not really the answer to the question. It’s not a second opinion if it comes from the same source as the first.

80's era cluster ring
1980’s style cluster ring. Photo by Neil Beaty


Unfortunately, it’s not as easy as it seems.  Most jewelry appraisals are estimating what it would cost to replace the item with another of like kind and quality, at retail, new, locally.  That’s a mouthful of a sentence but each buzzword deserves attention.


Many jewelry items are mass-produced. A factory will make a few to a few thousand of them and then sell them off as they can. When they’re gone, they’re gone.  They get efficiency in manufacturing and marketing, and the customer gets a relatively unique item.  If the original item is still on the shelf, replacement is relatively easy.  Just buy another one.  But what if it’s not?  Replacement must be custom made, probably with US labor.  By its nature, this is more expensive a process. That means replacement value is usually more than the transaction price.  That’s their problem, not yours, but it really does cost more to make things this way. It’s not evidence of a bargain.


Sale of goods or services in small quantities directly to the end consumer.  In the case of jewelry, this normally means specialty jewelry stores selling things one at a time.  There are other markets and not everyone charges the same prices, even for the same things.  The hotel gift shop in Aspen costs more than the flea market.  That is not evidence of a bargain.


As in not used.  This affects nearly everything you buy but somehow jewelry is viewed differently. The watch in your jewelry box is not new, but the insurance company is agreeing to replace it with one that is. This gets especially tricky if the model changes slightly.


Place matters.  Hieroglyphic themed pendant thingies are cheaper in Egypt. They have them in tourist booths all over the place.  Back home it’s a little harder.  Diamonds are usually cheaper online from a far away vendor than they are at the mall.  As intuitive as this is, it’s not evidence of a bargain.

Like-kind and quality.

This is the heart of an insurance appraisal.  It’s effectively a purchase order for the replacement. It maps out the materials, grades, weights, authorship, and so on so that replacement can be made.  It’s the description section, the photographs and such that will be used to make or order the replacement. This is almost always what the insurer is agreeing to do.  To be a bargain, it needs to be the same thing and to get the same thing, the appraisal needs to accurately define like kind and quality.

Diamond baguette pendant. Photo by Neil Beaty


Click here to set an appointment for an inspection.