It’s fairly common nowadays for valuations to come with engagement rings and other jewellery, but usually they have some huge, seemingly meaningless value on them.
This leads to a fairly important decision when it comes to insuring your engagement ring – should you insure it for what you paid, or for what it is valued at?
Now on the face of it, it may seem like an easy decision – get it insured for what you paid for it – you’ll always be able to go back to the jeweller and buy it for the same or roughly the same cost.
However, when preparing a valuation, a valuer has to take into account many factors, such as:
- Australian dollar fluctuations – remember back in 2001, the Australian dollar was trading at below US$0.50, it it now above 80 cents. Since diamonds, gold and other precious metals are all traded in USD, fluctuations will affect the price of replacement.
- How long the valuation is designed to last. A valuation that lasts five years will carry more currency risk and inflation than one lasting one year. However, two years is pretty much standard.
- How much the engagement ring or piece of jewellery would cost in a brick and mortar store, given a customer’s choice. Independent valuers don’t take into account whether you bought it from the internet or from Tiffany’s, however, a valuation for insurance purposes should assume prices from brick and mortar stores.
With all these factors to consider, a valuer must balance your interest (a lower premium) with a price that isn’t too low that it makes them liable for claims in the future.