By Lee Sherman
While jewelry is often included in most homeowners and renter’s insurance policies, many people often over-look the need to make sure they are fully covered. To begin with, that policy is usually not enough to cover the full replacement cost of the item, especially if it is an engagement or wedding ring, or an expensive watch. Most jewelry has only a nominal value, perhaps equal to what you could get if you melted it down for the silver or gold in it. But, if you’re in possession of something antique or containing precious stones, this jewelry may make up a larger part of your overall portfolio.
Jewelry is riskier than most other asset classes. Besides fluctuations in value, you need to be prepared for the various things that can happen to it over the course of ownership. It’s easy to lose, steal, or damage, in part because of its small size and accessibility (a wedding ring you wear every day for example or your favorite pair of earrings). A good insurance policy will account for all of these things and more, including an unexplained disappearance.
Passion investments, in art, coins, wine, and other high-end collectibles, are made for love not money but they can add a lot of value to your portfolio. Collectors need to be particularly mindful of the value of these assets as even a collection made up of modestly priced items can quickly add up to real money. In addition, these values are in constant flux (as regular viewers of Antiques Roadshow are well aware). Many people purchase antiques out of nostalgia for a certain era like the one they grew up in or own heirloom pieces. Turns out, many of these items can bring real value.
If you collect these things, you’ll need to make sure they are regularly appraised (experts recommend once a year to once every few years). The value of art is known to appreciate over time, with rarity, condition, and fashion being the three major determinants of value. Making sure your collectibles are covered requires policies that take into account the full replacement value of the item (not just what you may have paid for it) in the case of theft and damage such as a flood, fire, hurricane, or other natural disaster.
While most major insurance providers will insure your jewelry, art, coins, and other collectibles, depending on your passion you may have to seek out a specialist like Lloyds of London, a British insurance market that is well known for insuring just about anything.
By following a few simple steps, you can ensure that you have protected your assets. Start by going over your existing policy to make sure any items you may have purchased are covered. Perhaps you just got married, inherited a diamond ring, or decided to start a collection of cathedral radios from the 1930s. Get these items appraised. And insure them for the full replacement value (not what you paid for them). Rinse and repeat once a year or more if the asset class is unusually volatile.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.