Replacement policies for insurance

Most insurance policies these days are for replacement. The company is agreeing to replace a lost item with another of like kind and quality, or words to that effect, in the case of a loss. Replacement policies are an unusual arrangement in the insurance world but it’s the way it’s been done for decades with jewelry. They’re offering to buy a new replacement item, if they can get it for less than the declared value on the policy. Otherwise they’ll cut a check for the full value of the policy. They want things appraised for replacement, new, retail, locally. That’s an odd requirement since that’s usually not what they do.

Most insurance policies are replacement policies. The company agrees to replace an item with another of like kind and qualityNew

Your item almost certainly isn’t new. Rather like a car, it became used as soon as you bought it, if not before. It may have wear-and-tear. It may have modifications. It may have been repaired. It may even be an antique. When they hire someone to make a new one, they don’t specify that the wear be replicated. The standard for Replacement policies new is the appraisal. This is why they are asking for it. If and when the item is lost, they’re going to take the appraisal, strip off personal information and the price, and give that description, photographs, lab reports, etc. to their replacement jeweler. They’ll give a bid to replicate or replace the piece. The insurers drive a bargain. They’re huge companies and savvy shoppers. It benefits the jewelers to treat them well and the pricing is pretty competitive. That bid becomes the face value of the claim. They’ll buy you an item, they’ll pay that amount for you to go somewhere else and buy one, they’ll even pay you with this discounted amount. It doesn’t matter if the appraiser said it’s ‘worth’ $10,000, if they can demonstrate they can replace it for $5000, that’s what the Replacement policies will pay, less any deductible you may have, even if you take the money and run. This is the number one point of confusion I see with jewelry insurance. An inflated appraisal doesn’t change the Replacement policies, it just increases the premiums.

Like Kind and Quality,

This is the reason for the appraisal, not so much the price. It’s the section that gives the dimensions, counts, weights, grades, manufacturer, etc. It’s the purchase order for the replacement. It may or may not match the actual receipt. The problem is twofold. Sometimes sellers lie. Just because they called it a 2 carat natural diamond doesn’t make it so, even if they wrote it on a self-described ‘appraisal’. Not even if that’s what you paid for. This leads to the next important issue. They have a vested interest in reporting an inflated value. It makes a purchase look like a bargain.

Independent Appraisals.

In this context, it really just means a 3rd party. Someone who isn’t the buyer or seller, and isn’t working for someone else who is. If the seller was the client, it’s not independent. If you are the seller and the buyer is the client, it’s not independent. If it’s an offer to buy, it’s not an appraisal at all.

Branding.

As most people know, brands usually cost more than more generic equivalents. Tiffany items generally cost more than equivalents from Costco. That’s not scandalous, although it was the subject of a lawsuit. This is true even if the item is actually made by the same company (Which Tif and Costco most definitely are not). That’s largely the REASON for brands at all. They give confidence in quality and attach things like warranty and consistency, but all of that comes at a price. Branding on an item is adding value, and the replacement should be with the same brand. With most brands, the only way to buy a ‘new’ one is to go back to an authorized retailer and buy one. All others are used. If what you had was a genuine widget, it’s only appropriate that they replace with a genuine widget. Seems reasonable, right? But what if the brand is no longer available? That starts a negotiation. They can find one on the secondary market, maybe. They might find an alternative maker that is like kind and quality. Maybe. Expect a fight.