Appraising Value for Man-made Diamonds
Insurance replacement appraisals for man-made diamond jewelry are like all other jewelry appraisals. They are based upon the current replacement cost of that item, factoring in the retail firm that will most likely replace the item if lost or stolen.
To insure new items in case of loss or damage, “Point of Sale” documents stating the purchase price and item description will usually be accepted by insurance companies, if presented in a reasonable time period after the purchase.
Other than that, when having any jewelry item appraised, the replacement value should always be a researched value, not a price paid. If the item is new, one would certainly hope that the appraised value would be equivalent to, or greater than, the purchase price.
Appraisals are good for many reasons, above and beyond providing the insurance company with a replacement value. Appraisals by a trained gemologist/appraiser also let the client know that they got what they thought they were getting, as well as whether they paid a fair price.
While there are a number of factors that could affect this appraised value, what we are focused on here is determining the retail cost to replace the man-made diamonds.
Insurance Company Policy
Insurance companies will insure man-made diamond jewelry just as they would any other item of jewelry.
We spoke to Jeweler’s Mutual as well as All State and State Farm insurance companies and all agreed that this is just business as usual.
What about Updated Appraisals
Most insurance companies will ask the client to have their jewelry re-appraised every so often. These updates are important to reflect the jewelry’s current value in the marketplace, whether the value has gone up or down, so the insurer is paying a proper premium, neither too much, which is a waste of their money, nor too little, which might leave them owing money out of pocket in the event of a loss. An experienced appraiser can also identify potential problems such as damage or loose stones.
Jewelers Mutual requests an updated appraisal every 2 years, while State Farm suggests an update every 5 years.
Mined Diamond Update
A typical natural mined diamond jewelry appraisal update will provide the insurance company with potentially a higher appraised value, thus raising the insurance premium to cover the new replacement cost. Not having an update on a natural mined diamond jewelry item could be problematic for both the client and the insurance company, especially if the value has increased substantially. A higher current value of the jewelry would not be reflected in the insurance premium, and therefore it would not be insured for the proper current replacement cost. (As stated above, this could leave the client owing a balance to have it replaced if lost, stolen, or damaged.)
If a man-made diamond jewelry appraisal is a year or more old, it is likely in need of an update. Current pricing trends tell us that the cost to replace the man-made diamond is most likely less than it was a year ago. Without an update, the client is currently paying higher premiums for a potentially lower replacement cost.
Insurance companies such as the ones mentioned do not keep records of which appraisals are for natural mined diamonds or for man-made diamonds, leaving it up to the appraiser and client to make sure the appraisals are updated as the values change, avoiding overpaying for unnecessarily higher premiums.
On the other hand, some insurance companies, such as Chubb, automatically bump values up each year, whether it tracks the market or not. In many cases, clients have their jewelry so overvalued, they may be paying premiums on a ring the insurance company bumped up to $1 Million, when in fact it’s only worth $500,000. In this case, an updated appraisal would reset the value to reflect the current market and save the client from overpaying premiums.
For man-made diamond jewelry, the replacement cost for man-made diamonds has been steadily decreasing annually (if not monthly) since its creation decades ago. Over the past several years we have seen man-made diamond pricing related to natural mined diamond prices using industry pricing guides going from 60% to 70% to 80% to 90% and more below the natural mined diamond price listings.
Because of this trend, we might expect that insurance replacement appraisal values may never exceed the purchase price of man-made diamond jewelry items, as we currently do not expect the cost for man-made diamonds to increase over time. (It is possible that inflation may change costs, but appraisers do not forecast such events.)
DeBeers and Lightbox Pricing
DeBeers has used a different pricing strategy for man-made diamonds that they produce by simple cost pricing; $800/ct., with no reference to industry natural mined diamond pricing guides.
At Lightbox, all our man-made diamonds are priced at $800 USD per carat, or $1500 USD for our Lightbox Finest™ collection. As we grow the stones to our own specifications, we can price our man-made diamonds in a linear way. This means that the price per carat goes up as the size increases, but your price for the consistent high-quality cut, clarity, and color does not. If you want to buy apiece of Lightbox Jewelry (rather than a loose stone) a small setting cost is then added to the price of the stone, reflective of the type and amount of your chosen metal.
This is an excellent reference page for many questions that may have been left unanswered or if you remain uncertain. It can be helpful to read it from someone else’s point of view.
Professional appraisers evaluate and correlate the replacement cost with the retail establishment that will be replacing the item.
Lightbox also makes note of branding costs.
For their appraisal expertise and advice, special thanks to:
David Atlas, Associate Director of the National Association of JewelryAppraisers (NAJA), and Chairman of Ethical Issues for this association.
Martin Fuller, FGA, GG (GIA), Master Gemologist Appraiser®, ASA, andCertified Senior Member – NAJA