Not All Policies Were Created Equal
First, not all homeowner's policies provide coverage for jewelry. There are several different standard "ISO" policy formats on which almost all residential property insurance policies are based. The most basic "fire" policies cover only limited specifically named perils (causes of loss) to the dwelling structure itself. As there is no coverage provided for any articles of personal property, accordingly, there would be no coverage for jewelry under these policies. Second, those polices that DO provide coverage DO NOT all contain the same "limit" for jewelry, nor do they contain the same type of coverage.
Policy Limits $$
Keep in mind that each insurance company can "adjust" their policy from the standard forms, to change numbers and conditions. Some insurers write their own policies, loosely based on the ISO forms. The point is there is not one standard, by which all policies are exactly the same -as long as the policy conforms to state law, the insurance company can write it any way they want. Under a standard HO-3 policy, the default language will often specify that the policy provides coverage for jewelry with limits of $1000 for any one item, with a maximum of $1500 for all jewelry in a single loss.
How Does That Work?
How does that work? - Let's assume you have a deductible of $500 on your HO-3 policy. Now, if someone burgles your home and takes a $1000 diamond ring, the insurance would pay $500 ($1000 value of stolen ring, less $500 deductible) for the stolen ring. If someone burgles your home and takes your $1500.00 ring, the insurance would pay $1000.00 for the stolen ring ($1000 limit for single piece of jewelry - the deductible is "waived" or applied to the loss in excess of the policy limit). If someone burgles your home and takes a $3000.00 ring and a $250 pair of earrings, the insurance pays $1250.00 ($1000.00 single piece limit, $250 for the earrings, and the deductible is "waived" or applied to the loss ins excess of the policy limit) If, however someone takes the jewelry box with $5000.00 worth of miscellaneous jewelry, then insurance pays the $1500.00 limit and the deductible is "waived."
Increasing The Limits
With most insurers you can get an special blanket "increased jewelry loss" endorsement to the policy which increases the limits. Typically this will increase the standard policy limit to $1500 per any one piece of jewelry and $2500 maximum for all jewelry. Obviously, this does not do much to cover special pieces of jewelry. You can get a "rider" added to you policy for any piece of jewelry worth more than the policy limit provides. This protects you and the insurance company. You get protection for the specific piece of jewelry, with its appraised value on record with he insurer. The insurer gets protection in having a documented record of what the jewelry is and what it is worth. And, the premiums for jewelry riders are negligible.
Not all coverages are the same, and this can determine if your loss is covered or not covered. These are "standard" policies, known as "ISO" forms, ranging from bares bones fire policies, to premium policies. Each of these different formats carries different coverages and each individual insurer can re-write the policy to suit their own business needs. Some policies, such as the fire policy, carries very limited "named perils" coverage for the structure only. That means that there is no coverage for any personal property, including jewelry. Most homeowner's policies, however, provide some level of protection for personal property, including limited coverage for jewelry losses. Some policies will carry a "no deductible on jewelry losses" clause so there is no deductible applied to any covered jewelry loss, while others do not.
What Does "Named Perils Coverage" Mean?
Under the standard HO-3 $1000/$1500 jewelry protection discussed above, the policy will provide coverage for loss to the jewelry under any one of the 17 named perils listed under their personal property coverage in the policy. This is called "named peril" coverage. If the cause of loss does not fall into one of these named perils, then, no coverage. Theft, for instance, is one of the named perils. "Misplaced," on the other hand is not. When something is lost, insurance adjusters have a formula to determine whether the loss can be construed as a 'theft' or not. For instance, if you lose the $1000 stone out of your ring, this is a simple "loss," not a theft, thus, there is no coverage under the named peril coverages.
What is "Open Peril" Coverage?
The jewelry coverage upgrade to $1500/$2500 usually includes a clause making it "open peril" coverage. This means that the loss is covered unless there is language in the policy specifically excluding it. Using the example above, if the stone falls out of your ring, this is not specifically excluded, so it is a covered loss. If, on the other hand, you are mad at your spouse and you put the ring in the garbage disposal, the "loss caused by an intentional act of the insured" exclusion precludes coverage for that ring. Additionally, with many insurers, this upgrade endorsement will carry a "no deductible for jewelry loss" clause, waiving the deductible on any covered jewelry loss.
Riders for Jewelry
Finally, you can also add the rider as discussed above, to specifically cover an individual piece of jewelry. These riders almost always are provided on an open perils basis, with their own set of exclusions, which provide much broader coverage than the standard policy (though, I'm not sure about the garbage disposal scenario). They also almost always include the "no deductible" clause, unless it is a VERY expensive piece of jewelry for which you are negotiating the terms of the rider with the insurer.
Why does the insurance adjuster tell me my $2000 diamond is only worth $750? Insurance is based on a principal of indemnity - that means to put you back in the place you were before the loss. What the insurance company owes you is the value of the jewelry, or a replacement of like kind and quality. It does not owe you retail cost, and it does not owe you what you perceive the jewelry to be worth. The jewelry market enjoys a huge market mark-up at the retail level. You may even walk away with an "appraisal" showing the value of the ring at $2000.
Actual Replacement Cost
Well, the insurance adjuster's concern is not how good of a deal you think you got. What the adjuster will find out is, how much does it cost on the wholesale market to buy a ring exactly like the one you lost. If you want the ring replaced, the insurance company can usually get it done at a wholesale cost (which is gonna be less than the sale price you got) and the wholesaler is making some money, too. In most instances, if you are working with a reputable insurance company and an expereinced jeweler, this will not be an inferior piece of jewelry, but will accurately reflect like kind and quality to the one lost.
No Profit Under Insurance Policy
Keep in mind that your insurance policy is obligated to make you whole for your loss, or "put you back in the position you were in before the loss," less any deductibles, exclusions, etc. It does not provide for you to profit from the loss. So, before you're ready to scream at your adjuster, think about what you want to get from your insurance company - do you want your ring replaced? They can help. Do you want to profit from your lost ring? You'll have a battle on your hands. If you have an insurance coverage question, it may warrant consulting an attorney to ensure your rights are being respected and protected.