A guide to find, choose and save money on engagement ring insurance

As part of the ongoing Spending Reduction Series, today I present: Engagement Ring Insurance. Back when Mrs. Thriftyskate and I were dating we occasionally talked about money. As things got more serious we talked about large, upcoming purchases, mainly the engagement ring and wedding. Although we were thrifty, we still wanted a few of the luxuries in life. This led us to purchasing an engagement ring which had enough value to make it worth insuring.

After purchasing the engagement ring I proudly protected the new asset with an insurance policy. The jeweler I purchased the ring from strongly endorsed a particular company, without any type of “affiliate” relationship, so I felt confident choosing their recommendation. After all, why shouldn’t I trust a jeweler to know how to insure jewelry?

And so we lived happily with the ring, with our wedding and with the yearly insurance premiums. Then this year something felt different when I received the annual renewal notice, This seems awfully expensive. I did some digging and found that the premiums had been going up a predictable $6 every year for several years. I was on the auto-renewal plan and had never noticed these creeping premiums!

After the recent insurance changes to my car, I thought, why not ask my life-auto-home insurer about a jewelry policy? A few minutes phone call later and I had myself a quote.

There was a catch though. I needed to get a re-appraisal since they required one within the past 2 years, and it had been longer since the original appraisal.

Not a problem. A 20 minute trip back to the friendly local jewelry store I went to several years earlier for the original appraisal and I had an updated appraisal for only $15 – a bargain since the original cost $150!. For those wondering, the appraisal came out almost the same as the original – it was a few hundred dollars lower actually. The store owner politely explained the value fluctuates and it’s nothing to worry about – I wasn’t.

Great, one last phone call back to the insurance company. Their last question, would you like to insure against the appraisal value or the purchase value?

A short side note here for those unfamiliar with jewelry pricing. Jewelry is purchased at retail price. Jewelry, especially diamond jewelry is appraised above retail price. This phenomenon is just difficult enough and not enough of a financial impact to stop the average person from educating themselves. I encourage you to continue reading the vast resources of the internet about this prolific scam. In summary, it’s collusion between the jewelry industry and insurers. You’ll understand the reason in a moment.

The insurance representative was still waiting for my response. I managed to blurt out, what’s the difference? To which I received an obvious response: the policy could insure against retail or appraisal value (low or high value).

As my mind raced to find a logical choice, I continued with questions, If I file a claim how will I be reimbursed?

Turns out they would try to replace the ring as like-in-kind first, and if they couldn’t, they’d give me a check for the insured amount. What I heard though was We’ll replace with retail and if we can’t find the same thing we’ll give you the policy amount. In other words, I would likely be getting a physical ring as a replacement, identical to mine (Mrs. Thriftyskate’s). An important note here: her ring is a common design and would likely be found in a jewelry store.

I took 5 minutes to search for the same ring at Blue Nile based on the characteristics of the ring – using the “4 C’s” as the criteria. The search results confirmed the lack of value appreciation, as evidenced by the almost-identical appraisal. Therefore, the insurance company would go buy, at the same price I paid, a very similar ring using it’s cut, clarity, color and carat… even if I was paying premiums to replace at the higher appraisal amount.

So I must choose retail value for the policy! There would be no point in paying for a policy which would cover a more expensive ring, only to get replaced by a less expensive ring.

There was one last decision to make: Which deductible? Unlike the MiEV, this was not a gray area. There would be no middle ground to potentially repair the ring if lost. If it’s lost it’s lost.

I stared at those deductibles for a good long while without an epiphany. That meant time for a visual. I decided to plot the deductibles versus the annual premium as a percentage of the replacement cost (value minus the deductible).  

Here’s an example:

Annual premium: $100

Deductible: $500

Value: $10,500

Replacement cost: $10,000 ($10,500 – $10,000)

Premium as a percentage: 1% ($100 / $10,000)

RingPremiumPercent
Almost exponential… not quite linear… possibly asymptotic…

As the deductible increased, the annual premium became less compared to the replacement cost.

Interesting. It appeared as though I should choose the higher deductible since it amounted to a smaller overall cost as compared to the ring value.

What about the break-even time point? At what point in the future should I have chosen a particular deductible if I file a claim?

For that I needed to consider the total cost: the premium plus the deductible. I graphed the costs based on the cost if the ring was lost in a particular year.*

Here’s an example:

Ring lost in year: 10

Annual deductible: $58

Total in annual deductibles paid: $580

Deductible amount: $1,000

Total cost: $1,580 ($580 + $1,000)

RingReplacementCost
For the curious: Minimum spread at year 26 of $140

By year range, here is what I should choose:

If I file a claim, the deductibles I should have chosen to have the lowest out-of-pocket cost are the following for the years:

Years 1-14, $0

Years 15-18, $100

Years 19-27, $250

Years 28-33, $500

Years 34+, $1000

The graph tells an interesting story. In the short term, I should choose the $0 deductible. But, after a while those premiums really add up. The more time that passes, the higher the deductible I should have chosen. Thus, if I don’t ever expect to file a claim, I should choose the $1000 deductible.

However, I’m a practical guy. Never experiencing theft, devastating damage or otherwise total loss over the next 34+ years, while hopefully not, it might actually happen. I wouldn’t expect it to happen soon, but I also wouldn’t expect it to happen at least 50 years from now.

So what should I do!?!

I want to minimize my costs now and later. Notice in the graph that pretty orange line in the middle in the beginning years, then still in the middle in the later years?

That’s our winner. I don’t know when I will need to file a claim so I’m minimizing my expense exposure now and later by balancing the probability evenly across time. Additionally, I would expect 19-27 years from now Mrs. Thriftyskate and I will be the most active, traveling and generally enjoying our early retirement thus expose to probability that the ring will get lost.

One last gut check, Would I be okay absorbing a $250 loss if I were to lose the ring? Yes.

I want to point out that no amount of insurance could replace the sentimental value of the ring. It has meaning beyond its intrinsic value. That is something insurance cannot protect.

So I happily called back my insurance agent back and signed up for the $250 deductible.

How should you choose a jewelry insurance policy deductible?

Make sure having an insurance policy is appropriate. If the item has significant value, it is probably worth insuring. However, if losing the item wouldn’t cause you too much disappointment then it may not be.

  1. Determine if retail value or appraisal value is appropriate. If your jewelry is fairly common and you can easily find similar pieces for sale at about the price you paid, go with retail. If not, consider the appraisal value.
  2. Shop around for quotes. I made the mistake of not doing this and overpaid for years. Don’t forget to ask for quotes at all the different deductibles they offer! Also, if you have multiple policies with your home/auto/apartment/boat/etc insurer they may offer a discount for opening another policy with them.
  3. Get an appraisal if required by the insurance company. They may require this even if you’re only insuring to the retail value. If you’re getting a re-appraisal, check back with the jeweler who did the original appraisal – they may offer a discount for your repeat business.
  4. Select a deductible. Do you fear losing the jewelry soon? Plan on keeping the item in a fire-resistant safe, locked away forever? Think about your risk tolerance and if the replacement cost would too high considering the deductible.

There you have it, a Thriftyskate guide to finding, choosing and saving money on engagement ring insurance. Thrifty score: 26/40

*You are correct, I did not factor in the ring’s value fluctuation or effects on the premiums due to inflation. Let’s go out on a limb here and assume wages will keep up with inflation, thus making this a wash for this analysis.

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April 2016 Expenses

Recurring expenses:

Mortgage and Rent: $2,826.16

Babysitter and Daycare: $950

Bills & Utilities: $407.13

Household: $38.43

Gas & Fuel: $73.85

Entertainment: $23.68

Groceries: $145.63

Lunch at work: $25.06

Restaurants: $42.73

Gifts & Donations: $80

Gym membership: $29.99

Dry cleaning/personal care: $28

Total recurring: $4,670.66

Non-recurring expenses:

Travel: $1,106.40

Ebay/Amazon selling: $9.25

 

Total non-recurring: $1,115.65

Grand Total: $5,786.31

tulip-748500_1920
April showers bring May water bills?

We had another big month of spending in the ‘Travel’ category because we booked flights to attend a wedding on the East Coast in August. Spending time with family and friends is important to us though, so it is money well spent!

Our restaurant spending went from $0 to nearly $43 this month due to dinner out before the MMM meetup and a birthday dinner for Mrs. Thriftyskate’s mom. Again, things we were happy to spend money on. Also, quite proud of a mere $25.06 in ‘Lunch at work’ spending. I (Mrs. Thriftyskate) used to eat lunch out twice per week without fail, and it’s amazing how little I miss it now that I’ve gotten into a new routine.

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Mr. Money Mustache Meetup Recap – Manhattan Beach

A little while back Mrs. Thriftyskate noticed there was going to be a Mr. Money Mustache meetup in our area, and Pete was going to be there! We had to jump on this rare opportunity to meet the person whose internet presence we had followed for so long.

This was the first meetup I have ever been to. I had heard about people going to meetups or even participating in those flash mobs but never actually went from random stranger on the internet to real life hang out before. It was so refreshing to be able to talk about living a minimalist lifestyle while pursuing personal financial goals without people looking at us like we had three heads.

It was great seeing everyone at the Mr. Money Mustache meetup in Manhattan Beach on Friday (April 9, 2016)! Both Mr. and Mrs. Thriftyskate were there to enjoy the great company of so many passionate financial independence and early retirement people. Hey, I even got to meet THE Mr. Money Mustache, Pete.

The night started off by us stopping at the nearby Wahoo’s Fish Taco (a regional Mexican, fast-casual restaurant). As we walked into the restaurant I saw a small table with who I thought was MMM. The wife and I had a few moments of, “Was that him?”, “Are you sure?”. We played it cool and waited until the meetup to say hello.

We arrived at the pier a few minutes after 6 and it was a large crowd. Probably about 75-80 people by my estimation at one point. We knew no one prior to the event. By the end we had chatted with quite a few people.

Pete was mingling with a small group so I casually walked over and joined. He was talking about a topic near to our hearts, the outrageous price of real estate out in California. He had some great points about finding other more convenient and less expensive places to live and then becoming part of another Longmont-esque revival. Very ideal indeed. The Thriftyskates have an ongoing conversation about where we could move not just within the confines of our current employment, but pursuing different types of income or even careers.

Later in the evening I had the opportunity to chat with Jesse, the founder of You Need a Budget (YNAB). Very cool guy with some great insights on personal finance. The Thriftyskates don’t use YNAB, although we have thought about it in the past. We chatted about the Tesla and some of the very slick features, especially the “auto pilot”. A fellow EV owner!

Jesse also talked about some of the PeerStreet information him and Pete had heard earlier that day. PeerStreet, while it may sound like LendingClub, is fundamentally very different. I will be keeping an eye out for that company as a possible alternate investment opportunity down the road. There are some rather high income and net worth requirements to get involved so it may be awhile.

A few impressions of the crowd:

  • The STEM fields were heavily, if not exclusively, represented. An assumption I had prior to the event, too.
  • The age range was early twenties to middle age with a few older and wiser mustaches mixed in. A few married couples and even fewer with kids. No one brought their kids. I think all of these were a function of the day (Friday) and time (after work/dinnertime).
  • Some people rode their bikes, some drove (including us). Some were local, some came from farther away. Distance is an un-Thriftyskate yet un-ignorable factor for getting anywhere in southern California.

The night ended with the crowd dispersing from the beach and we headed back to pick-up Miniskate from Grandma’s.

It was a fun time and fun people. This has inspired us to go another MMM meetup in the future. Hopefully we see some familiar faces soon!

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We’re in the middle and it’s boring

 

I’ll start by acknowledging that this might get an eye-roll or be categorized as a “first world problem”, or just a “FI/RE pursuit” problem. In other words, a good problem and one I’m happy to have. The purpose of this post is to remind ourselves of how far we have come and how to enjoy the remainder of the FI/RE journey.

We haven’t traveled this path before. The end-point is unknown. The timing is inexact. There will be pitfalls. There will be successes. We have a hazy view of the future with some idea of the types of experiences we want along the way.

Way off in the distance, barely breaking the horizon, is the glow of early retirement. We know it’s real, we’ve heard about it from those who have seen it. There are marvelous stories of how one can choose work as if it pays zero, or actually zero. Carefully sipping money from a source that will never run dry.

mountains
Which one is the ‘FU money’ goal?

Over the past three years, we’ve cut over-consumption, saved an emergency fund, purchased a home with 20% down within reasonable commuting distance of our jobs, paid-off student loans, replaced a money-pit vehicle, optimized our income tax strategy, found a low-fee index fund, and started to pay off the mortgage early. Continue reading “We’re in the middle and it’s boring”

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