Sara and James owned a 1930s vintage watch. It was made of 18ct white gold and its grain-set dial was surrounded by 40 single-cut diamonds of good commercial quality.
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As a condition of insurance, they had to have the watch valued by a qualified valuer. The valuer said the replacement value for the watch was $3000.
Three years later, time stopped. The watch was lost and the couple were forced to lodge a claim. The insurer had the watch revalued. It offered to settle the claim for $1050 – its price on the second-hand market – rather than $3000.
Sara and James were stunned. The insurer had accepted premiums based on the watch’s replacement value of $3000. They told their insurer: “to try to settle this claim for one-third the insured value is absurd.” Eventually, the insurer relented. It agreed to pay $3000, but only after the couples’ valuer defended the original valuation.
Insurers cap their liability for valuable items (see "Handling a dispute" below). When it comes to jewellery, a typical cap is $3000 for a single item and $15,000 for multiple items. Some insurers are less generous than others (see our Insurance cover table). If you want to increase the cap, you need to ask your insurer to specify your jewellery on your policy schedule. You may be charged a higher premium for the privilege.
Insurance & Savings Ombudsman Karen Stevens recommends regular professional valuations for items of jewellery over the policy cap. Stevens says valuations can speed up the claims process and enable you to claim an item’s full value. Depending on an item’s complexity, a full valuation for insurance purposes can cost $50 to $115.
Alas, there’s no obligation for the insurer to pay the item’s specified amount – even if it’s based on a professional valuation.
IAG, the country’s largest general insurer, has jewellery revalued whenever a claim is made. Craig Dowling, IAG Head of Corporate Affairs, says: “this is because often a loss happens sometime after a customer first obtained a valuation for a piece, so another is needed to establish its current value.”
It’s a similar story with AA Insurance. The company won’t get an item of jewellery revalued if it already has an up-to-date valuation. But AA Insurance Customer Relations manager Amelia Macandrew says: “due to jewellery values changing we will, on most occasions, organise a new valuation to ensure the customer receives the right settlement.”
In practice, this means you’ll get a smaller settlement if the insurer’s valuer believes your jewellery is worth less than the specified amount. But you won’t get a higher settlement if the insurer’s valuer finds your jewellery has been undervalued – the specified amount is the maximum you can claim.
Insurers offer two levels of cover for your contents:
NB: Your item won’t necessarily be repaired or replaced. Instead, your insurer may choose to pay-out the item’s replacement or present value (depending on your level of cover).
If you have contents insurance, you should check which items are covered for replacement value and which are covered for present value. Most comprehensive policies automatically cover jewellery for its replacement value, but there are exceptions.
While you’ve got the policy open, check for any limitations or conditions that apply to jewellery. For instance, ASB Bank and The Co-operative Bank require you to have specified items of jewellery serviced by a jeweller every 12 months. If you don’t, you can’t claim for loss or damage caused by faulty clasps or loose settings.
When you have replacement-value cover, your insurer will most likely opt to replace your lost or stolen jewellery. IAG says it’ll use the quote provided by its valuer to set up a purchase order or credit at your chosen jeweller. That’s straightforward if a suitable replacement is available on the retail market. It’s more difficult if you’re claiming for an antique or handmade item.
Karen Stevens says the replacement value will be for a reasonable equivalent. A cash settlement is a possibility if an acceptable new replacement can’t be found. But insurers may reserve the right to settle cash pay-outs for the item’s present value.
In the UK, the Financial Ombudsman Service has stated it’s unfair for the insurer to insist on replacing one-off items with a modern substitute from a major high-street retailer. Instead, claimants should be allowed to choose where they buy a replacement or, alternatively, opt for a cash settlement if an acceptable replacement isn’t available.
Stevens says that’s a reasonable position. “Generally, a replacement insurance policy will aim to repair or replace the item, if at all possible. If a replacement isn’t available or possible, it would make sense for there to be a pay-out for the value without deduction.”
Report by Luke Harrison.
If you own precious jewellery, here’s how to make sure a claim is successful:
If you and your insurer are unable to settle a dispute, you can make a complaint to the Insurance & Financial Services Ombudsman.
The Ombudsman has received several complaints from consumers who’ve been caught out by the limits applied to jewellery. In one case, a claimant’s house was burgled and $45,000 worth of jewellery was stolen. The insurer accepted the claim, but applied the policy limit of $3000 per item for unspecified jewellery, up to a maximum of $10,000 total.
The claimant complained to the Ombudsman. She argued she hadn’t been told about the limit. The Ombudsman’s case manager disagreed: the limit was part of the insurer’s standard policy, which had been referenced whenever the policy was renewed. The case manager didn’t uphold the complaint on the grounds that consumers have an obligation to read their policies.
However, insurers are required to tell consumers about unusual or onerous provisions within their policies.
In another burglary case, a claimant lost about $14,500 worth of jewellery. All but one item was unspecified. Her policy’s limit for multiple unspecified items was $3000 – far below the market standard (see our Insurance cover table). What’s more, the insurer was unable to prove a policy document or schedule had been sent to the claimant when the policy commenced.
The Ombudsman’s case manager thought the policy’s low limit could be considered onerous or unusual. After some consideration, the insurer offered an ex-gratia payment of $2000 on top of the policy limit. The claimant accepted the revised amount.
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