Are Clients’ Valuables Adequately Insured?

It’s hard to turn on the news today and not hear about the price of gold and other precious metals. Having nearly quintupled in value over the past ten years, according to data from Kitco about the London Gold Fixing in U.S. dollars, gold has everyone wondering if we’re at the peak of a commodity bubble or only halfway through a historic bull market.

Meanwhile, even after a recent correction in early May, the average price of silver remained more than seven times what it was in May 2001, and more than two times what it was just two years ago in May 2009. Platinum prices have also appreciated dramatically. We’re all trying to assess the investment opportunity and risk. But there’s one risk your clients are likely not considering—the risk of their jewelry, silverware, and other items made with precious metals being underinsured.

Many affluent clients don’t realize how much their jewelry and precious metals items have appreciated, so they haven’t adjusted their insurance coverage to reflect the higher values. Roger Ponn, a well-known Chicago appraiser, recently examined a jewelry collection of more than 400 pieces that increased in value by 45% in just two years.   

“Quite a few of their handmade pieces were 22-and 24-karat gold, with 24-karat, of course, being pure gold,” explains Ponn. “Higher karat content means faster price appreciation, when precious metal prices rise.”

Similarly, Gerald Escobar, principal of Asset Archives, a global appraisal firm based in Atlanta, Georgia frequently sees clients who are underinsured across all categories of valuable articles, including jewelry.

“Historically, clients who do not proactively manage their valuable articles can be underinsured by up to 40% to 60%,” says Escobar.

For affluent families, who may have jewelry and silver collections worth hundreds of thousands of dollars, the issue of underinsurance is no small matter. To prevent significant loss, they should take two steps.