Jewellery and watches are among the most expensive portable items people ever own, in terms of both financial and sentimental value. Unsurprisingly, they are also the items most often burgled from homes and lost, damaged or stolen during holidays.

Yet research reveals 68 per cent of Australians don’t have insurance for the valuables they take on holiday. Likewise, even though Australians spend an average of A$6,000 on an engagement ring, almost half are uninsured.

In Hong Kong and Singapore, there’s even less proclivity to insure jewellery, possibly due to low crime rates and the public’s perception of risk, says Rhiannon Alban-Davies, insurance broker for Fine Art, Jewellery and Specie at Willis Towers Watson Hong Kong. 

“People often think insurance is only for theft,” she says. “They don’t realise it covers accidental loss or damage, mysterious disappearances and other events as well.”

Replacement vs indemnity cover

For those who do insure their jewellery, the various policy options can cause confusion — and ultimately, disappointment when claims are settled contrary to expectations.

In Australia and New Zealand, insurance products can be specifically designed to cover jewellery. Customers wanting to protect high-value items can also purchase add-on insurance at the point of sale, underwritten by specialist jewellery insurers. 

Despite the availability of such options, many people simply insure their jewellery through household or renters’ policies, which fall into two categories: replacement cover and indemnity cover, explains Paul Nilsson, owner of GemLab Diamond Graders and Jewellery Valuers in Auckland.

“Traditionally, valuers here, as well as in Australia and the UK, tend to value modern jewellery for replacement with a new item like it, but some people buy cheap policies that only cover them for the indemnity value, which is either the retail market value of the item or its replacement value less depreciation,” he says. 

“The client might get something valued at $5,000 and add it onto their policy, without knowing that the maximum they’re ever going to get paid out is $2,000, because they only have cover at the indemnity value level.”

Nilsson also says valuers too often decide arbitrarily that an estate or antique item can’t be replaced with an equivalent new item, and so only value it at the (usually lower) market value. Replacement policies can also default to an indemnity settlement when cash is requested instead of a replacement, or an item isn’t specified on a policy.

Though mass-market jewellery insurance isn’t as common in Hong Kong and Singapore, customers can purchase specialist cover, but only for higher-end collections typically worth around US$20,000-plus, says Alban-Davies. Otherwise, jewellery can be included in a standard household policy, albeit with limitations.

“Under a household policy, there would be no cover for depreciation, such as if you lost one of your stones and couldn’t replace it like for like, and you also have to watch out for per-article limits,” she explains. 

Such policies also tend to have exclusions for unexplained and accidental loss. 
“It can give the perception to the public that insurance doesn’t pay for jewellery,” adds Alban-Davies. “Brokers have to combat that by explaining insurance is not just about theft, and also design a policy that is broad and doesn’t have any exclusion for mysterious disappearance or unexplained losses.”

A better solution

Since the 1990s, GemLab has included both replacement and indemnity values on all of its jewellery valuations, in the hope of giving customers greater insight into the different ways an insurer might settle a claim. 

“Sometimes people have gone back to their insurer, found out they were only covered for indemnity and have had the opportunity to upgrade their policy,” says Nilsson.

He believes brokers should follow this lead and be more proactive about educating customers — ensuring they have up-to-date valuations and proof-of-purchase or ownership documentation, in line with their policy’s requirements. 

Similarly, Nilsson says it’s important to highlight cover limits, including both single-item and event limits, given that customers are often caught out by the latter. 

“Let’s say Mrs Smith has $250,000 worth of jewellery and she’s listed her $10,000 ring and $7,000 bracelet on the policy but not the rest of her jewellery, which is mostly worth less than $3,000.

 She thinks she doesn’t have to worry about getting that valued, but she actually needs to prove what it was and what it was worth when she makes a claim. Otherwise, she’ll get paid out for her ring and bracelet, but the rest of the jewellery lost in the burglary will be capped at the event limit.”

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