What Happens If Your Jewellery Is Underinsured?

Jewellery is underinsured when the amount of insurance cover is less than the amount required to replace the item in accordance with the terms of your insurance policy.

For example, imagine your engagement ring was valued for insurance purposes at €5,000 several years ago.

You have continued to insure it for €5,000.

If the ring now has an insurance replacement value of €8,000, there is potentially a €3,000 difference between the amount insured and the current replacement value.

That is the potential problem with relying on an outdated jewellery valuation.

There are several reasons why the replacement cost of jewellery can change over time.

Gold and precious metal prices can change

The cost of gold, platinum and other precious metals can fluctuate. This can affect the cost of replacing a piece of jewellery.

Diamond prices and availability can change

Diamonds can also change in price and availability. A diamond ring that was valued several years ago may no longer have the same replacement cost today.

Manufacturing costs can increase

The cost of replacing a piece of jewellery is not necessarily the same as its original purchase price.

The cost of materials, skilled workmanship and manufacturing can all change over time.

Your valuation may simply be out of date

Perhaps the most common reason is simply that your jewellery has not been professionally valued for several years.

A jewellery valuation reflects the circumstances and replacement costs at the time it is carried out. As those circumstances change, the valuation may no longer provide an accurate basis for your insurance cover.

This is where underinsurance can become particularly important.

If you make a claim and the amount of cover is not sufficient, the settlement will depend on the terms and conditions of your insurance policy.

Some policies contain an average clause, which can reduce the amount paid when an item or contents are insured for less than their full value. The CCPC gives examples of how underinsurance can reduce an insurance payout.

For example, if jewellery or contents were significantly underinsured, you may not necessarily receive enough to cover the full cost of replacing them.

However, not every insurance policy works in exactly the same way.

Your policy may also have specific conditions relating to valuable items, single-item limits, specified items and the type of cover provided.

This is why it is important to check your own policy and speak to your insurer or broker if you are unsure.

A Simple Example of Jewellery Underinsurance

Imagine you have a diamond ring with a current insurance replacement value of €10,000.

However, your policy only provides €7,000 of cover for the ring.

If the ring is subsequently lost or stolen, there may be a significant shortfall between the amount available under your insurance and the cost of replacing the ring.

The exact amount an insurer would pay depends on the terms of your policy and how the claim is assessed.

The important point is simple:

Being insured does not necessarily mean being adequately insured.

Your Jewellery May Also Be Affected by Single-Item Limits

Underinsurance is not only about the valuation figure.

Many home insurance policies have limits on the amount that can be claimed for an individual item of jewellery.

For example, your policy might provide a general level of contents or valuables cover but have a lower single-item limit.

If you own a valuable engagement ring or diamond ring above that limit, you may need to have it specifically listed on your policy.

The CCPC recommends checking single-item limits and specifying valuable items such as jewellery separately where required.

Your own insurer will be able to confirm what is required under your policy.

If you are concerned that your jewellery may no longer be adequately insured, there are two important steps to take.

1. Contact Your Insurer or Broker

Start by checking your current insurance policy and speaking with your insurer or broker.

Ask:

• What level of cover do I currently have for my jewellery?
• Is the item specifically listed on my policy?
• What is the single-item limit?
• Do you require an updated jewellery valuation?
• What type of valuation do you require?

Your insurer or broker can explain what your particular policy requires.

2. Arrange a Professional Jewellery Valuation

If your valuation is out of date, or your insurer requires an updated valuation, arrange a professional jewellery valuation for insurance purposes.

A professional valuation should establish the relevant insurance replacement value based on the jewellery itself and the purpose of the valuation.

For a diamond ring, this may include assessing the diamond's characteristics, metal, setting, construction, condition and other relevant factors.

The purpose is not simply to put a higher value on your jewellery.

It is to establish an appropriate and professionally supported replacement value for insurance purposes.

Not necessarily.

The amount you originally paid for a piece of jewellery is not automatically the same as its current insurance replacement value.

Likewise, the second-hand or resale value of jewellery is not necessarily the figure required for insurance purposes.

An insurance valuation has a specific purpose: to establish an appropriate replacement value based on the requirements of the insurance policy.

This is why a professional jewellery valuation is different from simply looking at the price of similar jewellery online.

The simplest way to reduce the risk of underinsurance is to review your valuable jewellery periodically.

A good starting point is to:

1. Find your latest jewellery valuation.
2. Check the date of the valuation.
3. Check the amount for which each item is insured.
4. Check your policy's single-item limits.
5. Confirm whether valuable items need to be specifically listed.
6. Speak with your insurer or broker if you are unsure.
7. Arrange an updated professional valuation where necessary.

Taking these steps before you need to make a claim can help prevent an unpleasant financial surprise later.