How to beat the nitpickers on jewellery insurance

The shout came just when the burly man was about to prise the boards off the sundeck.

"Found it!" My dear friend, grateful and relieved, had found her grandmother's engagement ring in a Samoan fale.

Swimming, sand and sunscreen is a recipe for losing jewellery. But you can just as easily do it in the comfort of your living room.

Ask the woman who was robbed at her own open home.

Or our own insurance and savings ombudsman, who managed to whack a chunk off a diamond by bumping her hand on a wall.

"People think diamonds don't break," says Karen Stevens. "They break."

Jewellery claims can cost insurers a fortune. They are also magnets for fraud.

So expect a lot of nitpicking. "They will be scrutinised to a much higher level than if you broke one of the chairs from your dining set," says Stevens.

Here are some real life arguments insurers use to avoid paying claims, and how to avoid them.

1. You took it off

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A "very very very" expensive diamond ring was stolen from a woman's dressing table. The owner got nothing. "There was a clause in the policy which said the ring was only insured if it was being worn or locked in a safe," says Stevens. Make sure you read the fineprint. If it says you're only covered if the ring is super-glued to your finger while you brandish an axe, consider another policy.

2. You can't prove you owned it

Don't be like the chap who claimed he just happened to have photos of himself feeding the cat while wearing a very expensive watch. Another photo depicted him asleep, still wearing the watch. A look at the data embedded in the photos revealed they were fakes taken after the "burglary".

Then there was the woman with the never-growing shrubbery. She supplied a photo taken in her garden "three years earlier" depicting her wearing her treasured bling. Miraculously, however, when an investigator visited, the garden shrubs had grown not an inch. "I don't think people are fully aware that insurers will investigate," says Stevens.

If you own valuable jewellery, keep photos or videos and proof of purchase stashed in a safe place.

3. You were slack

One poor bloke's car was relieved of its jewellery after he dropped his sick wife at a hospital.

The insurer claimed he was careless for not securing the bag when he rushed to join his wife.

He was paid only after taking his insurer to the ombudsman, who said the slip was "mere inadvertence".

There are plenty of other cases of nitpicking. Was a train traveller keeping an eye on their bags? Did they snooze, or sit too far away? Did they quickly alert the local cops?

One man who left his suitcase in the boot of a Chinese taxi received nothing for losing his pricey watch because his travel policy said he had to carry his jewellery "when using transport providers".

Just what is a reasonable level of vigilance is murky.

But the files show you don't have to be perfect. One reason you have insurance is to cover the odd brain-fade. Being disqualified requires ignoring what a reasonable person would see as a significant and obvious risk.

4. You didn't specifically cover it

It costs extra to insure special items of jewellery, which is why many people don't do it. This often comes back to bite them at claims time. A typical contents policy might be capped at, say, $15,000 in total and $2500 for each item of jewellery. Your insurer doesn't have to point this out. Take the burglary victim who had to settle for $2,000 after losing her $4,000 engagement ring despite claiming she was never told about the limit.

Another woman was luckier. She lost $45,000 of jewellery under a contents policy maxing out at $3,000.

This time the ombudsman told her insurer to pay more because it hadn't drawn her attention to the unusually low claims cap. Stevens says it's best to supply the insurer with an independent and up-to-date valuation. "There might be a requirement under the policy to get a valuation done every year."

5. We can replace it cheaper

This is the nemesis of so many claimants. You lose a bespoke engagement ring and the insurer offers to have it remade by Michael Hill. If you don't want that, they offer you cash for the market value, something akin to what your worn ring might have fetched at Cash Converters.

Sometimes insurers offer vouchers to buy something that can only be used, again, at Michael Hill.

Insurers get discounts from particular jewellers. While the resulting item may be technically worth the same, many people don't see it that way, says Stevens.

It is crucial to check what replacement or compensation your insurer will offer you after a loss before choosing a policy. Stevens says people may be entitled to reject vouchers from a particular retailer. It all depends on the policy.

"Generally indemnity value or market value is the cost to buy an item of same age and quality and generally that price is going to be less than the replacement value, which is what it would cost you to buy another new one."

A colleague of mine successfully argued that only his jeweller could remake his wife's ring.

"If we wanted to go to Michael Hill we would have done that in the first place. We argued there were copyright issues because our jeweller owned the design."

The catch was that his specialist jeweller had to remake the ring for the Michael Hill price.

6. You held an open home

We saved this example for last because it is the scariest.

The outcomes of insurance disputes can seem random, and seldom more so than when it comes to open homes. Take these cases. One woman kept a pouch of jewellery in a plain wooden box on a shelf in a walk-in wardrobe. She forgot to move it when she put the house on market and it disappeared during an open home. The insurer claimed she was too careless but the ombudsman disagreed. She got paid.

Another woman also had jewellery stolen at an open home. She didn't get a cent because of an exclusion in her policy barring payments for theft by people lawfully at her house. Apparently the thief, who had left a false name, was lawfully on the premises for the open home. Stevens says the same rule goes for tradespeople. "If you have invited anybody into your home and they steal something you are not going to be covered. So if you have anything of significant value it must be locked away. Certainly don't leave jewellery out."

 - Stuff

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