Re-appraising coverage for gold and jewellery

The rise in the price of gold means that your clients may not have sufficient coverage for their personal items

Coined the “asset class of the decade,” gold is one commodity that knows how to impress.

The price of gold has skyrocketed 250% and more over the past five years and 450% in the past ten. The “king of metals” reached an all time high in March making analysts proud and gold owners wonder just how long they should hold onto their precious investment. It’s therefore not surprising that we see more and more ads on television urging gold owners to sell their jewellery or have it melted down for cash.

On our side of the financial services industry, we concern ourselves with what this means for insurance and insurance brokers.

Many homeowners may have undervalued their jewellery and have a significant coverage gap. Most policies provide a special limit on jewellery coverage but with the increases in the price of gold, these limits may be out of date. Even customers who previously chose to insure their jewellery specifically with a separate valuable articles policy (VAC) may find their coverage is not where it ought to be. This can happen over time, especially if appraisals for items of significant value are not updated every few years. A piece of gold jewellery that was insured for $50,000 with an appraisal five years ago may have now more than doubled in value. Talking to clients about acquiring and maintaining a more inclusive VAC policy may be in both the client and broker’s best interest.

The effects of rising gold prices are not a wealthy customer’s concern alone. This can have an even greater impact on the baby boomer generation as they begin to inherit their parents’ jewellery. Customers who are not accustomed to acquiring jewellery items of significant value may not appreciate the added insurable risk that now requires coverage beyond what their original policy allowed. By understanding the needs of their customers and offering timely and relevant insurance advice, brokers will continue to be worth their weight in gold.

Marilyn Horrick is the assistant vice president, Chubb Personal Insurance, Chubb Insurance Company of Canada. The views, information and content expressed herein are those of the author and do not necessarily represent the views of Chubb Insurance Company of Canada or of any of The Chubb Group of Insurance Companies. The information provided should not be relied on as legal advice or a definitive statement of the law in any jurisdiction. For such advice, you should consult your own legal counsel.

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