What a valuation is for, and what it is not

The document that comes in the envelope with a ring says a number, and almost everybody reads it as what the ring is worth. It is not. It is an estimate of what it would cost to buy the same thing again at retail, which is the number an insurer needs and the opposite of the number you would receive if you sold it.

The three numbers on any piece

• Replacement value: retail, including the margin of a shop, the setting labour and the tax. The highest of the three and the one on an insurance valuation.
• Market value: what a private buyer or an auction would pay. Typically a quarter to a half of replacement, depending on category, and lower for anything unbranded.
• Scrap or intrinsic value: the metal by weight and the stones at trade prices, with the workmanship valued at nothing. The floor, and a surprisingly common outcome at the wrong dealer.

A ring valued at a certain figure for insurance may sell for a third of it and scrap for a fifth. None of those numbers is dishonest. They answer different questions, and the trouble starts when a document answering one is read as answering another.

What an insurer actually needs

Household contents policies usually cap single articles at a low figure, commonly somewhere between a thousand and two and a half thousand, unless the item is specified. Anything above that cap is simply not covered at its value, whatever the total sum insured looks like. Specifying an item requires a valuation and raises the premium, and it is the difference between a claim and a disappointment.

Read two clauses before anything else. Whether cover is worldwide or only in the home, because a ring is most at risk in an airport and a hotel. And whether the insurer replaces through its own supplier, which most do, because that determines whether you receive your ring remade or a cheque.

The two questions to ask an insurer: away from home, and who chooses the replacement.

Why valuations go stale

Metal prices move, stone prices move, and retail margins move. A valuation from a decade ago is a historical document. Gold alone has moved enough in most ten year windows to leave a piece materially underinsured, and lab grown stones have moved so far in the other direction that some older valuations now overstate a diamond that would be replaced with a grown one.

Three to five years is the sensible revaluation interval, and immediately after any large move in metal prices. Most valuers charge either a flat fee per item or a small percentage, and the percentage arrangement creates an incentive worth being aware of.

What a good valuation contains

• Full measurements of every stone, not just the centre, with estimated or certified weights.
• Colour and clarity for the principal stones, stated as an estimate where the stone is mounted, because grading in a setting is inherently approximate.
• Metal fineness, total gross weight and the maker or hallmark if present.
• A photograph, which is what actually allows a replacement to be made and a stolen piece to be identified.
• The basis of valuation, stated explicitly, and the date.

If a document lacks the measurements and the photograph, it is a receipt with a larger number on it. That is the version most people are given.

Provenance, which is the one thing that adds value

Original box, papers, receipts and any certificate move resale value more than most people expect, in jewelry as in watches. A signed piece from a recognised house with its documentation can hold a much higher fraction of retail than an identical unsigned piece. Keep the paperwork in a different place from the object, photograph everything, and record the numbers.

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