Jewelry Appraisal Fees
Jewelry insurers need good appraisals. Consumers sometimes balk at the cost. Here's a look at what the insured faces in pricing appraisals, along with some tips to help guide your clients.
You may even want to print out this issue and give a copy to clients who need appraisals.
First, a few things a jewelry owner should know before pricing an insurance appraisal:
- An appraisal is important not only for valuation but for descriptive detail of the jewelry.
- An inflated valuation (a valuation significantly higher than the selling price) adds no "real" value to the jewelry since the insurance company limits payments to the cost of replacement.
- A fair valuation means that premiums will not be excessive.
- Besides a detailed description, the appraisal should also include one or more photos of the piece.
- Photos should include the item's stampings, which usually show metal quality and the manufacturer's trademark, as well as the jewelry as a whole.
Inflated valuations do not add value.
Now, how to get a reliable appraisal at a fair price:
Free appraisal from the seller – No
A client may feel that, since she got an appraisal from the store when she bought the jewelry, there's no need to get another. Insurers know (or should know!) that appraisals supplied by the seller are notoriously inflated. Often the valuation far exceeds the sale price (see Appraisal Inflation). In addition, the quality description of the gem may be exaggerated, or information that would betray the jewelry's low quality is simply left off the appraisal.
Client needs an appraisal from a properly credentialed gemologist who is independent of the seller. (See below for credentials.)
Appraisal fees based on value—unethical
Fee based on jewelry's value - No
Some appraisers base their fees on the value of the jewelry being appraised. Most appraisal organizations agree that this practice is unethical. If the appraisal fee is a percentage of value, the appraiser may be tempted to inflate valuation.
A high valuation may make the jewelry owner feel good in the moment. But if insurance is based on an inflated valuation, the insured would wind up paying excessive premiums. Clients should avoid appraisers who charge by the value of the jewelry.
Fee based on size of stone - No
This approach may seem to make sense. However, the vast majority of jewelry insured has center stones of 1-3 carats, and it takes the same amount of time to appraise a 3 carat diamond as a 1 carat diamond.
It is only large stones, say a diamond of 4 carats or more, or special gems, like a Kashmir sapphire or Burma ruby, that require more time. Such stones are less commonly traded and the appraiser must research current price and availability to arrive at a valuation. But, by far, the vast majority of insurance appraisals are on diamond items and lower-cost colored gems.
Consumers with typical jewelry should avoid an appraiser who increments price with the size of the stone, as this pricing approach seems unethical.
Appraisal Day at a jewelry store - No
Appraisal Day at a jewelry store—probably pricey
Sometimes a jewelry chain store will advertise a day when customers can come in for jewelry appraisals. The hype may suggest that this is a bargain, as well as a convenience, for the customer. Such an event is, of course, a way to get jewelry owners into the store and entice them to buy more jewelry. But customers should be aware that they will probably be paying higher-than-usual appraisal fees.
For such events, appraisers typically must split their fees with the hosting store, and an appraiser may lose as much as 50% of the fee. In addition, the appraiser will incur travel and other expenses to set up a gem lab at the store. In order to cover costs, the appraisal fees must therefore be considerably increased.
The consumer is likely to get a better rate by dealing with the appraiser directly than by going to a chain store event.
Hourly rate - YES
An hourly rate is a fair way to approach pricing. A simple piece, such as a solitaire diamond ring, will cost less because the appraiser frequently appraises such jewelry and much of the research on value has already been done.
If the jewelry is complex, with many stones of different sizes or varieties, the appraisal will require more time and will cost more. Based on experience, the appraiser should be able to give an approximate appraisal price for the piece in advance.
Comparison shop for best hourly rates.
By comparing hourly rates, it is easy for consumers to shop for the best rate offered by a properly credentialed appraiser. (See below for discussion of credentials.)
Multiple appraisal discount
Many appraisers offer a discount if the client presents several pieces for appraisal at the same time. A client in need of multiple appraisals should certainly ask for such a discount.
Many appraisers keep appraisal information in their files for five years or more. If the client needs an updated appraisal valuation within this time, the price is considerably lower than for a new appraisal. An updated appraisal should be issued only if the appraiser has cleaned and inspected the jewelry.
No update needed
Appraisal updates—some insurers don't require them
Not all insurers require appraisal updates. One prominent jewelry insurer has proprietary software to update valuations and premiums each year. In most cases, once a good appraisal has been submitted, the policyholder never needs to have it updated. This is a great saving to the insured over the years, especially when several pieces of jewelry are scheduled.
Even though no appraisal update is needed, the insurer recommends annual cleaning and inspection of the jewelry. Many jewelers and appraisers offer these services to their customers at no charge, suggesting an appraisal update where appropriate.
Appraiser Credentials: Independent — GG or FGA+ — CIA
Ideally, a jewelry owner should have a detailed appraisal from an independent gemologist appraiser, one who is not affiliated with any jewelry retailer and can give an unbiased description and valuation of the jewelry.
GG or FGA+
Independent of seller
The appraiser should also be a trained gemologist: either a GG (Graduate Gemologist of the Gemological Institute of America) or an FGA+ (Fellow of the Gemmological Association, the British equivalent of a GG).
It's an advantage to use an appraiser who has additional training in jewelry appraising for insurance. One course offering such additional training is the Certified Insurance Appraiser™ (CIA) course of the Jewelry Insurance Appraisal Institute.
Do you know such an appraiser to recommend to your clients?
It is a great value-added service to be able to recommend to the insured an appraiser with the proper credentials; an appraiser who supplies the detailed description useful to insurers; an appraiser who charges appropriate fees.
It's well worth the effort to do some research to locate an appraiser who services your area and meets these criteria. Establishing a business relationship could work to your mutual benefit. You could recommend the appraiser to your clients, and the appraiser could recommend you for jewelry (and other) insurance. Clients appreciate being guided to a reliable professional they can trust, and they'll also tell their friends about your services.
GIA Diamond Report: a one-time expense
In addition to an appraisal, all diamonds of substantial size (1 carat or more) should have a GIA diamond report. GIA charges by the size of the diamond, but for smaller stones in typical jewelry the price increments are low. And this is a one-time expenditure.
Having a GIA report is always a worthwhile investment because GIA's grading is regarded as the most accurate. If there is a discrepancy between GIA's description of the stone and the description given on an appraisal or on a report from any other lab, GIA's grades are regarded as the final word.
A GIA report actually adds value should the client decide to sell or trade the stone. Many jewelers and appraisers will assist in removing the stones and sending to GIA for the report.
Note, however, that a GIA report describes only the diamond and so it is not a substitute for a detailed appraisal describing the entire piece of jewelry and giving a valuation.
FOR AGENTS & UNDERWRITERS
Recommend that your clients get an appraisal from an independent appraiser as soon as possible after the purchase, to verify that the quality and value of the jewelry are as stated by the seller. The appraiser should be a trained gemologist (GG, FGA+, or equivalent), preferably one who has additional insurance appraisal training. One course offering such additional training is the Certified Insurance Appraiser™ (CIA) course of the Jewelry Insurance Appraisal Institute, Oakland, CA.
As a service to your clients, establish a mutually beneficial relationship with an appraiser in your locale who has the appropriate gemological training and writes good appraisals. You'll have someone to recommend who is reliable and fairly priced, saving clients the inconvenience of doing the research themselves. Clients will appreciate your extra work on their behalf. In addition, your business will increase because the appraiser in turn recommends you for jewelry (and other) insurance.
Follow this link to locate a Certified Insurance Appraiser in your area.
Be on guard against inflated valuations. Compare the appraised value with the sales slip, if available. If there is a large discrepancy between valuation and selling price, the selling price is a truer indication of value.
If a claim is made for damage, always have the damaged jewelry examined in a gem lab by a trained gemologist (GG, FGA+, or equivalent), preferably one who has additional insurance appraisal training. One course offering such additional training is the Certified Insurance Appraiser™ (CIA) course of the Jewelry Insurance Appraisal Institute, Oakland, CA.
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