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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Big Savings by avoiding waste: How to save money on Diaper Genie refills

Before Miniskate was born there was so much talk about all the things that needed to be done before she arrived. Especially all the things to buy. Modern society has created seemingly endless methods to depart people from their money not the least of which is buying things for newborns. There seemed to be so much waste in it all. Especially in the waste. Enter the Diaper Genie. A special little contraption that quietly stores multiple day’s worth of rotten baby excrement in a sleek molded polymer container to avoid offending the olfactory senses of the neighbors three blocks over. It’s a trash can with a “clamp” lever mechanism in the middle to keep the bag shut at all times lest you turn to stone at the sight of yesterday’s dirty diaper*. Continue reading “Big Savings by avoiding waste: How to save money on Diaper Genie refills”

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Lifetime cost comparison for buying an electric car

Mid last year the Thriftyskates needed to replace one of our cars. It needed a repair I, Mr. Thriftyskate, could not fix despite several borrowed tool kits and an entire weekend in the garage. When a local mechanic’s shop quoted the costs of the repair, it almost equaled the trade-in value of the car. But before falling into another years-long financial commitment we needed to know how different cars could compare cost wise. Not just the purchase price, but the total, all-in, “everything but the kitchen sink” lifetime cost. The Thriftyskates needed a lifetime cost comparison to buy a car.

And so began the task of finding the right cars to compare. There were a few must-haves other than 4 wheels and an engine. At the time Miniskate was on the way so “baby space” was a key factor for any car under consideration. 

The requirements were:

-Reliability

-Purchase price

-Maintenance costs

-Energy costs

-Back seat can fit an infant car seat

-Trunk can fit a stroller

That was it. There were no criteria for silly amenities such as leather seats, cruise control, rear-view 3-D hologram laser imaging or magic anti-fog cloaking device. These were features I hardly used on my old car so there was no need to have them in my new car. In fact, I wanted less features. Less things to break, less things built into the overall price, less distractions to think about. Let’s add that in the requirements right now actually:

-Less crap

Not my cars dashboard
Where is the windshield defrost button?

There was still one psychological hurdle I was trying to overcome though.

Even with all of those inputs there was still a part of me that thought I would miss driving a highly-tuned premium-fueled ultimate driving status symbol. Why I was driving ones of those in the first place is another story. I searched the terms “most horsepower per dollar”. That led me down a rabbit hole which seemed suspiciously like a competition for the “most expensive” title.  I’ve been wise long enough to know they are all money traps. 

Eventually I came to the realization that every production car is designed to travel on a public road. Those roads have speed limits and safe-driving laws. Therefore, owning a car which could vastly exceed those restrictions was illogical. Why pay for that much car when I couldn’t use it?

I searched for “best used cars” without too much success either. Buying a car was an opportunity to make a large, financially sound decision. I didn’t have the luxury to make a mistake. There were many cars out there and most of the results didn’t give me enough details about the thing I really wanted to know. Given the number of remaining miles on a car, the purchase price, operating costs, total miles driven and ending trade-in value, what is the best option based on price?

Nowhere did I find an answer to that question. There are a few websites out there that come close but each misses the mark. Plus I wanted a flashy graph. Sure, I could have bought a low-cost used Toyota or Honda and called it a day. That wasn’t enough. I needed to know exactly how much this car was going to cost me over its lifetime in an easy to understand number.

Without a resource, I did what any thrifty person would do. I created my own resource: a spreadsheet.

I’ll show you the exact spreadsheet I used. But, before I do, I’ll explain a little bit about it.

Not all options are equal. How could I compare the cost of a used car, with that of a new one? The used car although less costly than the new one had more miles on it already. Then there was the calculation for varying MPG ratings. The method I used to overcome these issues was an overall cost-per-mile calculation. Add all of the costs then divide by the number of miles reasonably expected to drive. Lifetime cost comparison.

I identified 5 different options:

-New fancy pants car

-New ho-hum car

-Used ho-hum car

-Used Nissan Leaf

-Used Mitsubishi i-MiEV

At this point I had already narrowed down to one specific car – the Mitsubishi i-MiEV. From here on out I’m going to stop with the “i-”. Just MiEV, here we go. This little guy kept appearing in my search results. I had only seen images of it, but in my estimation it was exactly what I wanted. Minimalist with a healthy dose of thrifty.

An instant classic
An instant classic

After doing a bit of research, I stumbled upon some electric vehicle (EV) statistics. The MiEV was at the bottom of the sales numbers for 2012! Not very popular in the US. That surely must mean something?

There’s a long list of misconceptions surrounding EV’s. Too many to address here. I researched almost none of them before buying though. That sounds irresponsible, but I did the one thing that mattered. I researched issues related specifically to the make, model and year: Mitsubishi, MiEV, 2012. I looked at car reviews, blog posts and forums. There didn’t seem to be any outstanding problems just normal car stuff. I made a gut decision, figuring if there were no critical issues, this car was a serious option.

Why no Craigslist car?

I wasn’t willing to take the risk. I almost sold my old car with multiple mechanical issues on Craigslist. I ended up not doing so because I couldn’t in good conscience sell it to another individual without disclosing all the problems.* That made me realize there were probably less ethical people than me out there. I couldn’t afford to mistakenly buy a lemon nor did I want to deal with another clunker. The time required to pursue either option was more valuable than the money I could have potentially saved. Plus, you’ll see in a minute that it probably wouldn’t have even made much of a difference money wise!

Why no new electric car?

That purchase price was approximately between the new fancy pants car and new ho-hum car, so I guesstimated the result to be somewhere near the middle of those two. No need for extra calculations.  

Why consider an electric car at all?

My workplace generously offers free EV charging. You’ll notice I did calculate electricity cost in the spreadsheet for times I would need to charge at home. In addition, Mrs. Thriftyskate drives a gas powered car that has plenty of range for long road trips. Lastly and most importantly, I was inspired by Tim’s post over at Wait But Why

The battery will be dead in a few years and the car will be worthless.

That’s a statement I have heard from many people including EV owners and it’s never phrased as a question. It’s put as an absolute. I already accounted for that scenario in the spreadsheet anyways. Zero value at the end of ownership. There could be an entire blog post about why that’s not true.

Why not lease?

We’re in it for the long term. We did not want to put money down and make payments on a car that we didn’t own. 

Enough questions, here is the spreadsheet:

What Mr. Thriftyskate's dreams look like
What Mr. Thriftyskate’s dreams look like

That was the exact spreadsheet I used. If it made your palms sweaty, here is the summary:

-New fancy pants car: $0.54 / mile

-New ho-hum car: $0.39 / mile

-Used ho-hum car: $0.32 / mile

-Used Leaf: $0.31 / mile

-Used MiEV: $0.27 / mile

Wow. Even if I bought a Leaf, which I think is a fancy pants EV, it’s still less expensive than a used gas car. And the MiEV is about half the cost to drive compared to a ridiculous new car!

For me it was the best of both worlds with the MiEV. I could buy a reasonably priced car with none of the useless driver-distraction features.

After a short deliberation the Thriftyskates became proud new owners of a used MiEV. It’s been about 7 months of ownership and everything has been going well. Note that I haven’t become stranded on the side of the road due to a depleted battery because I have carefully planned my trips.

Despite the success so far I see 2 long-term difficulties:

Replacement parts. As I mentioned this was a low US-sales volume car. I anticipate a high degree of difficulty finding replacement pieces when stuff begins to break. I may need to special order parts specific to the car when the time comes. Luckily though, I’ll have some advance warning about worn tires or brakes.

My driving habits. Particularly, my bad ones. I really need to reign in the last-minute merging and hand gestures. I drive a very consistent route at almost the exact same time of day during the workweek at rush hour. Again, this was not a popular car to buy. My observations have confirmed this as I have seen exactly 2 others on the road in the past 7 months. The body style is fairly unique as well. All of this makes the car easy to identify. I am 99.5% positive people recognize me on a daily basis.

Despite these issues I am still confident the decision was the right one.

I had a few minor battles with myself over the details prior to buying. Some of the areas I argued with myself about:

I can’t be bothered to remember to plug-in my car to charge!

Stopping for a 10 minute gas tank fill-up every few days is way more inconvenient. It takes about 1.5 extra minutes to plugiin. I plug my cell phone in every night. My car is at least as important as my phone, so I can surely remember to keep it charged.

Why did you put a fancy pants car on the spreadsheet when you knew you didn’t want to spend that much money? You purposely induced the reference point effect to justify your decision!

Guilty. I was never going to pick that option, but it still served a few purposes. I wanted to know just how bad of a decision I could have made. Also, to understand approximately how bad of a decision I had been driving for the previous 12 years. Third, I needed to convince Mrs. Thriftyskate just how low the lowest cost option was. Fourth, and this was unintended at the time, to hopefully convince one of you readers not to buy a fancy pants car. For the last time, they depreciate the minute you drive off the lot. Just no.

Where did you get all of the assumptions/inputs?! These are inaccurate! You have dishonored my family!

I made reasonably informed estimates along with best guesses based on experience. This exercise was purely to prove a used electric car was a feasible option. My insurance guesses are probably over-insured and they don’t account for decreases in premiums over the years as the car ages. And the cost of gas is incorrect now that oil prices are down. And the cost of electricity doesn’t increase for inflation. Here is a visual that should illustrate why those inaccuracies don’t matter:

I've always wondered what the breakdown looked like in bar chart form
Smaller bar = bigger bank account

I’ve always wondered what the breakdown looked like in bar chart form.

Imagine a shift in any of the categories. That shift amounts to a marginal impact. For example, even if the maintenance cost is 50% low/high it is a small proportion of the overall cost.

As the months and years roll by I’ll continue to revisit this topic. There is a wealth of data yet to be generated to analyze in the future. The purchase of the MiEV is shaping up to be quite a cost-effective decision. One I would excitedly make again.

Thrifty score: 22/40

*Ultimately some unlucky person probably ended up buying the car through auction. But with a few changes of hands in that process I plead ignorance-is-bliss hoping there was at least some level of due diligence along the way for a thorough inspection.

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