The Value, and Risk, in Your Jewelry Box

BOSTON ( MainStreet) -- Spiking gold prices over the past few years have been a boon for many Americans, and not just those who invest in bullion, coins and mining companies.

The average person has seen their jewelry collection evolve from fashion to asset. The growing presence of shops and websites offering to buy unwanted gold jewelry is a testimony to how in demand and profitable the precious metal has become. Though less headline-grabbing, silver and platinum have also become even more valuable commodities; from January 2000 to January 2010, the price of gold quadrupled and the prices of silver and platinum more than tripled.
With prices soaring, family gold, silver and platinum jewelry and heirlooms need to be treated like bullion.

That entails an overlooked risk for many folks. When even a tiny earring clasp is worth enough to pay for dinner at a high-end restaurant, even a modest jewelry box can be worth thousands, ounce by ounce. And yet many fail to recognize the full value of what they own.

While most investors in precious metals may track prices closely on a daily basis, they are unlikely to consider how much their jewelry, silverware and other collectibles have appreciated in value, says Robert Courtemanche, division president of ACE Private Risk Services, the high net worth personal insurance business of the ACE Group ( ACE).

The rapid rises in the prices of gold, silver and platinum have therefore created an insurance gap, he says. A heavy gold necklace or heirloom silverware collection acquired years ago may be insured for only a fraction of the cost to replace it at today's prices.

"Since the economic downturn there is a general realization that these assets they have are worth more and they should be properly protecting them, especially if their financial portfolio, their liquid assets, have been fluctuating," Courtemanche says.

In a white paper published by ACE, Roger Ponn, a Chicago-based appraiser with more than 40 years in the business, spoke to the example of a long-time client's jewelry collection he recently reappraised. In 2004, the collection was valued at $384,000. Six years later, its value had risen to $682,000.

Ponn cites another example, that of a high-net-worth family in Wyoming who saw their jewelry collection of more than 400 pieces increase in value by 45% over two years. The high quality of the jewelry made the value rise more than it would have for most collections.

"Quite a few of their handmade pieces were 22- and 24-karat gold, with 24-karat, of course, being pure gold," he says. "Higher karat content means faster price appreciation, when precious metal prices rise. This is similar to what occurs with gold bullion and gold coins, which appreciate more rapidly than most gold jewelry, simply because they are made of pure gold."

Courtemanche cites Asset Archives, a global appraisal firm based in Atlanta that works with his firm, in estimating that clients who do not actively manage their treasures can be underinsured by up to 40% to 60%.

Don't assume your home policy or renter insurance has you fully covered. Most homeowner policies limit the amount the insurance company will pay for jewelry, money (including gold coins), silverware and other collectible items.

A typical policy will have a $1,500 limit on jewelry and a $200 limit for gold coins and other forms of money. More expensive policies may have higher limits, such as $10,000 for jewelry, but the affluent consumers willing to pay for high-end coverage are likely to have collections that exceed that. If they already have valuables coverage, they should ensure that the coverage amounts reflect the cost of replacement at today's prices.

Beyond making sure your valuables are properly insured, it is important to inventory and assess the value of your collection at least once a year, Courtemanche says. Take photos and videos of every piece of jewelry or heirloom that may be made of a precious metal and keep multiple copies in separate locations, such as a safe deposit box.

Don't go by purchase receipts; seek out a good appraiser for each item. This all but guarantees you have the documentation needed to satisfy insurance requirements, determine replacement value and ensure that an accurate, up-to-date value is paid out. Keep in mind, whenever possible, to document where an item was bought, since a Manhattan jeweler may charge more than one in the Midwest for an otherwise similar piece.

It is also important to inventory pieces as they are bought. ACE sends out reminders of this to clients each holiday season and after Valentine's Day, times when new jewelry is likely to have been gifted.

"Something bad happens to people and then they sit down and try to recreate what they had," Courtemanche says. "They always sell themselves short. With all the things they have accumulated over the years, some things invariably get missed."

Especially for the more affluent with more valuable collections, security should be top of mind, Courtemanche says. That includes background checks for hired help and contractors, including seeking out criminal records or a history of financial problems.

"You need to understand who that is who is in your house and has access to your things," he says. "Unsavory types see the same press on the price of gold."

Courtemanche points out that it can be five to six times cheaper to insure jewelry stored in a bank safety deposit box than at home. That doesn't mean you can't still wear a piece, although insurers may place a limit on how frequently an items can be removed from the vault.

"We also advise people to get a safe that is actually installed in their home so it can't be carried away by a thief or thieves," he says.

When traveling, never store jewelry in a checked bag.

"In the last two or three years, in loss reports, we have seen thefts from baggage as a major cause of loss," Courtemanche says. "Make sure you are carrying it with you when you go through security and that nothing leaves your sight."

-- Written by Joe Mont in Boston.

>To contact the writer of this article, click here: Joe Mont.

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