According to De Beers’ latest financial results, diamond prices are expected to climb due to an increase in demand this February. The company raked in $650 million in sales from rough stones in January alone, making it the company’s highest sales in three years and 18% more than the sales it achieved in 2020 pre-pandemic. Last month the company reportedly called for one of the sharpest increases in diamond prices in almost 10 years, raising the price for stones larger than one carat. Now it hopes to cash in big this month as buyers continue to put their savings from the pandemic into alternative asset classes, such as diamonds.
“Because people aren’t travelling due to lockdown restrictions or because they are weary of volatile stock markets, they have more disposable income to splurge on luxury items like diamonds or cars. They buy either for investment purposes, or to enjoy their splashy purchases,” says Christelle Colman, MD of Elite Risk Acceptances, a subsidiary of Old Mutual Insurance.
But, if you are planning to give a diamond to the special person in your life this February, be careful of getting swept away in the moment and not taking adequate steps to protect your jewellery.
“If you are lucky enough to be able to afford a high value item such as a diamond ring, make sure that your insurance policy will cover it before buying it, as some insurers won’t take on the risk that comes with an extremely expensive piece,” says Colman, adding that only specialist companies will insure jewellery items over a certain value.
A survey conducted in 2019 found that 28% of engagement rings were valued at more than $2,500, or over R37 000, while in the upper end of the market in South Africa, some diamond rings can cost as much as R5 million to replace.
Yet a major pitfall for many who buy such items is not adequately insuring it, or not regularly reviewing the insured value of the item. Colman says that shockingly, on average people are underinsured by 40%.
“If you translate this into money, a loss on a high value piece like a diamond can be substantial. This is one of the main reasons why many insured clients are out of pocket when a loss occurs,” says Colman.
She explains that this is because the replacement value of a piece of jewellery is not the same as the price you paid for it.
“The replacement value is determined by the current demand of the gemstone, the Rand/Dollar exchange rate, the price of platinum, and so on. In other words, the replacement value can fluctuate if there are spikes in demand and price. This is why it is important to conduct regular reviews to make sure the item is insured at the correct value.”
Below are Colman’s top tips on how to protect the value of your new ring this February.
Tip #1: Don’t share images of your bling on social media
“Sophisticated crime syndicates follow hashtags to do with weddings or engagements or similar. It takes very little effort for them to find you if you use check-in features that show your location, together with images of your fancy diamond ring,” says Colman.
Back in 2016, this is exactly what happened to Kim Kardashian West, who was held up by armed robbers who stole $10 million in jewellery, including a ring worth $4.5 million, after she posted about it online.
“It is important to not share the details, especially the purchase price, of your ring with anyone and to keep privacy on high alert,” says Colman. “However, if something does happen and you are properly insured, it is good to remember that you will be fully covered.”
Tip #2: Keep the proof of ownership
“The first thing that the insurer will want is evidence that you own the item. A till slip, an image of you with the ring, a warrantee or anything similar,” says Colman. “However, the most important thing required to determine the insured value of your item is the certificate you get authenticating your purchase.”
She says this is because it contains valuable information about your item, such as the clarity or cut of the diamond, the place at which you bought it, and so on.
In cases where inherited jewellery or antique jewellery changes ownership, a will is sufficient evidence for your insurer to use for proof of ownership. “Similarly, it is important, if you are updating your will, to detail your high value jewellery items.”
Colman says that is best to work with specialist underwriters and brokers who have tools at their disposal to help determine the value of inherited collections or antique items.
Tip #3: Don’t assume that your item is covered
High value jewellery items aren’t automatically included in a normal home contents policy.
“Understand that if you have to specify an expensive piece of jewellery, you are going to pay a higher premium because it is a high-risk item.”
Also, if you are travelling overseas with your piece, Colman suggests you check beforehand if loss or damage in another territory is covered under your normal policy, adding that not all policies are created equal and that some insurers will impose limitations.
“It is not necessary to specify your pieces if you are travelling under Elite’s policy.”
Tip #4: Store it correctly
If you are not wearing your jewellery, your insurance policy will require you to keep it in a locked safe. Colman says you need to familiarise yourself with your policy’s requirements, failing which, you will not be compensated in the event of a loss.
“We have seen many cases where clients who don’t store their jewellery properly at home experience mysterious disappearances. If your policy has a locked safe clause, your missing piece will only be covered up to a limited value, oftentimes not exceeding R50 000. This means if you own a high-end piece, say over R300 000, and it goes missing at home, your locked safe clause won’t be triggered, and you will only enjoy cover for the first R50 000.”
Colman says that even if you have a safe, there are still substantial risks to protect against.
“While it may feel unromantic to immediately think about insuring your jewellery, especially if you are newly engaged, it really is the most important step in guarding against loss. Accidents can easily happen, whether from bumps, knocks or scratches, while damage can be caused by fires, and losses from theft, either by home invasion or armed robbery, all of which are unfortunately common scenarios in South Africa,” concludes Colman.
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