I bought a ring for $12,000. The jeweler gave me an “Insurance Appraisal” for $20,000 to make me feel good. I insured it for $20,000, paying higher premiums. It was stolen. The insurance company found the exact same ring for $12,000 and paid that amount. I overpaid premiums for years for coverage I couldn’t use.
Key Takeaways
- Inflated Appraisals are a Scam: Jewelers inflate appraisals (often 100% over retail) to make customers feel they got a “deal.” This hurts you. You pay premiums on $20k, but the insurer only owes “Replacement Cost.”
- Replacement Cost Definition: The insurer owes you the cost to replace the ring with one of like kind and quality. If they can buy it wholesale for $12k, they pay $12k. They do NOT pay the face value of the appraisal.
- Agreed Value Policies: The only way to get the full $20k is an Agreed Value policy (like Chubb). Standard insurers (JM, State Farm) use Replacement Cost.
- The “Premium Tax”: By insuring $20k instead of
12k,youwasted 12k,youwasted100/year in premiums.
The “Why” (The Trap)
The trap is “Vanity Valuation.”
You feel rich having a $20k appraisal.
The insurer loves it because they charge you more.
But the claims adjuster uses their wholesale network. “We can replace this diamond for $11,500.”
You get the ring back, but you realize you were insuring “Phantom Value.”
The Investigation (My Analysis of Valuation)
I checked how insurers handle the “Feel Good” appraisal.
Jewelers Mutual
- The Model: Replacement. They work with the jeweler to replace the item.
- The Result: They pay the jeweler the agreed cost to replace it. They don’t cut you a check for the profit margin.
Chubb (Masterpiece)
- The Model: Agreed Value.
- The Result: If you list it for $20k and pay the premium, they send a check for $20k. This is one of the few exceptions.
State Farm
- The Model: Lesser of “Replacement Cost” or “Limit of Liability.”
- The Result: They pay the lowest market price they can find.
Comparison Table
| Policy Type | Premium Based On | Payout Amount | Verdict |
| Standard (Replacement) | $20,000 | ~$12,000 (Cost) | Ripoff |
| Agreed Value (Chubb) | $20,000 | $20,000 (Check) | Good (if you want cash) |
| Correctly Appraised | $12,500 | ~$12,000 | Efficient |
Step-by-Step Action Plan
- Reject Inflated Appraisals: Tell the jeweler: “Please write the appraisal for the actual retail replacement price, not an inflated number. I don’t want to overpay insurance.”
- Review Your Policy: If you have a Replacement Cost policy, lower your coverage limit to the actual retail price. Stop overpaying.
- Switch to Agreed Value: If you want the cash profit, switch to Chubb/Pure, but expect stricter underwriting.
- Update Every 3 Years: Gold/Diamond prices fluctuate. Adjust your limit down or up to match reality.
FAQ
Why do jewelers do this?
Marketing. “It’s worth $20k but I’m selling it to you for $12k!” It closes the sale.
Can I ask for a lower appraisal?
Yes. Or use the sales receipt as the proof of value for the first few years.
Does this affect vintage jewelry?
Vintage is harder to replace. An appraisal is more critical there, but “Agreed Value” is safer for antiques.