Under-insurance risk for jewellers: how to value stock and review your cover
Jewellery stock can change quickly. New pieces arrive, others are sold, customers leave items for repair, and stock may move between your store, suppliers, repairers and other locations.
Your insurance arrangements need to keep up with those changes.
For Australian jewellers, reviewing stock for insurance starts with three things: understanding the valuation basis in your insurance documents, keeping your stock records current and checking whether the limits still reflect how your business operates.
What is under-insurance for a jewellery business?
Under-insurance can arise when the amount insured does not adequately reflect the value that needs to be covered.
Why stock values can change
A jewellery business rarely holds exactly the same stock throughout the year.
Purchases, sales, repairs and other movements can change the amount and type of stock you hold. A figure that made sense at your last insurance review may need another look as your business changes.
How should jewellers value stock for insurance?
Start with the valuation basis shown in your insurance documents.
The value used for insurance should reflect the basis that applies under your policy and Schedule. If you are unsure what that basis means, speak with a broker.
Do not assume every valuation figure means the same thing
A retail ticket price, purchase price or valuation may serve a different purpose.
The National Council of Jewellery Valuers explains that the purpose and intended market of a valuation matter. The Jewellers Association of Australia also explains that valuations can be prepared for different markets, including retail replacement and auction.
For a jewellery business, the key point is to check which valuation basis applies to your insurance rather than assuming one figure works for every purpose.
Keep stock records current
Good inventory records can give you a clearer picture of what your business actually holds.
Australian Government inventory guidance says to review and update your inventory regularly to avoid costly errors and make better decisions for your business.
Keep purchases, sales and stock movements up to date
Your records should reflect purchases, sales, returns and other changes to stock.
Keeping them current makes it easier to compare the stock you actually hold with the values being used for insurance.
Make stocktakes part of your insurance review
A stocktake gives you a physical check against your inventory records.
Australian Government guidance also identifies supporting insurance claims as one reason a stocktake can be useful.
When might a professional valuation help?
A jewellery valuation can be prepared for different reasons, so it helps to be clear about why you need one.
Choose a valuer for the item being assessed
NSW Government guidance says that if you want your jewellery valued, you should look for a valuer that specialises in the item you want valued.
This does not mean every item of trading stock must be professionally valued. Consider the purpose of the valuation and how it relates to your insurance arrangements.
Check the limits that apply to your stock
Your total stock sum insured is important, but it may not be the only figure you need to review.
Check stock outside safes, display windows and robbery limits
Different limits may apply depending on where stock is kept and what happens to it.
If valuable stock is kept outside a safe or strongroom, held in a display window or exposed to other situations covered by separate limits, check the figures in your insurance documents.
Check stock away from your premises
Jewellery stock may leave your store for deliveries, repairs or other business activities.
Cover is subject to the applicable policy terms, conditions and limits.
Include stock that moves through your business
Stock may also be held by another party or left with your business by a customer.
Check stock entrusted to other parties
It is important to check stock coverage whilst entrusted to dealers, customers in the trade, repairers, cutters and brokers.
If entrustments are part of your normal business, consider how much stock may be away from your premises at one time and review the limits that apply.
Keep clear records of customers’ jewellery
Customers may leave jewellery with your business for repair or alteration.
Clear records can help distinguish these items from stock owned by the business and make them easier to identify during an insurance review or claim.
Review your insurance when the business changes
You do not need to wait until something goes wrong before reviewing your stock values and insurance arrangements.
Check your arrangements before renewal
Australian Government business insurance guidance says: It’s good practice to review your policies when your business changes or before you renew a policy.
Renewal is a useful time to compare your current stock records with the values and limits in your insurance documents.
A meaningful increase in stock, a change in where it is stored or a change in how much stock is regularly moved or entrusted to other parties may also be a good reason to review your arrangements.
