Diamond Price Decline: Are You Overpaying On Insurance?

Forbes

26-04-2025

Photographer: Andrey Rudakov/Bloomberg
Insuring diamond jewelry has traditionally been simple. The owner would have the stone appraised, report the value to their insurer, and pay a premium based on its replacement cost. However, the diamond market has shifted over the last decade. Prices for natural diamonds have fallen, while lab-grown diamonds have become an affordable alternative.
The combination of falling prices and increased concern over authenticity creates a financial dilemma that many consumers overlook. Does my diamond appraisal still reflect the premium I'm paying? Is the diamond still worth what the appraisal says? And if not, what should be done about insurance?
Natural diamonds have long been marketed as durable stores of value. But that perception is changing. According to the IDEX Diamond Index, which tracks real-time diamond trading prices, average asking prices declined by 38% over the past three years. In some categories, the drop has been even steeper.
According to industry estimates, much of this slide is tied to the rise of lab-grown diamonds, which now account for nearly half of engagement ring sales in the United States. These stones are physically and chemically identical to mined diamonds but cost up to 90% less. The price gap is widening as production technology improves and supply scales up. Consumers are increasingly opting for larger or higher-quality stones at lower prices, eroding demand for natural diamonds, particularly in the lower to mid-range of the market.
The downturn in diamond prices may be structural in nature, not cyclical. For years, supply was tightly managed, and pricing was relatively stable. But the surge in lab-grown alternatives has disrupted that equilibrium. Meanwhile, macroeconomic headwinds have added further pressure, from a slowdown in Chinese luxury demand to a broader caution in discretionary spending.
Most people insure their fine jewelry at the time of purchase, using the appraisal provided by a jeweler. These appraisals are often generous, listing values well above what the buyer paid. That can feel reassuring, but it also locks in a replacement cost that may no longer be accurate in today's market.
Consider a natural diamond ring purchased in 2019 for $12,000 and appraised at $15,000. But today, that same ring might retail for closer to $8,000. The diamond owner may pay inflated premiums if the policyholder hasn't updated the appraisal.
In addition, most collectibles policies automatically raise the insured value of covered collectibles—usually by 6% to 8% per year—in the event of a total loss. This annual increase is designed to help offset inflation and keep up with rising market values, but the feature can lead to an overinsured situation if prices fall. In the above example, the ring that was originally appraised for $15,000 may have an insured value of $20,000, which is much higher than the replacement cost.
The outcome of a claim could be even worse. In the event of a loss, the insured could receive a lab-grown replacement if the policy includes open-ended replacement language, even if the lost or stolen stone was a natural diamond.
Insurance policies vary. Some offer stated value coverage, where the insurer pays a fixed amount. Others offer replacement value, where the insurer provides a substitute as similar as possible to the original item. The latter creates ambiguity in today's market. If a policyholder loses a natural diamond, will the insurer replace it with another natural stone or a visually identical lab-grown version worth a fraction of the amount?
Lab-grown diamonds have complicated more than just pricing—they've blurred the lines of authenticity. Until recently, testing an undocumented stone's origin required sending it to a lab and, in many cases, removing it from its setting. That created cost and friction in resale and insurance claims, where verifying whether a diamond was mined or lab-grown wasn't always straightforward.
De Beers has just introduced a device that could change that. The company's new DiamondProof machine distinguishes between natural diamonds and other materials, even when mounted in jewelry. It is being marketed to retailers to give consumers confidence in their natural diamond purchases, with 0% false positives. In other words, it will never pass a lab stone as a natural diamond.
This technology has significant implications for the secondary market. A diamond assumed to be mined—especially if it was bought secondhand or inherited—could be lab-grown. That would instantly reduce its resale value and potentially invalidate assumptions used in past appraisals. Knowing with certainty whether a stone is lab-grown or mined will help owners and sellers of mined diamonds prove authenticity.
De Beers is hoping the new technology will restore confidence in the market. "Despite current market volatility, we believe in natural diamonds as a long-term store of value," says De Beers Group Natural Diamonds Market Lead Sally Morrison. 'For that reason, we believe it is critical for consumers to know exactly what they are buying so they can make informed choices. DiamondProof makes the technology widely available so that both retailers and their clients can be confident.'
The technology also adds a new layer to insurance underwriting. Carriers may begin requesting lab reports or scanning results as part of the appraisal process. In the same way that a vintage watch without original papers trades at a discount, diamonds without confirmed origin could lose value.
De Beers' DiamondProof technology
Owners of natural diamonds paying for itemized collectibles insurance should take four simple but important steps.
First, get a new appraisal. Ask for an assessment based on current market conditions, and ensure it reflects whether the stone is natural or lab-grown. Don't rely on a figure calculated five or ten years ago or even one based on retail markup alone. You may be overinsured.
Second, review existing insurance policies. Understand how coverage is structured. Does it pay a cash value, or does it replace the item? If it replaces, will it guarantee a natural stone? If unsure, ask your carrier or broker for clarification.
Third, consider having stones tested. If you plan to sell or even pass down jewelry to your family, having documentation proving the origin is helpful. With De Beers' new machine entering the market, expect to see more retailers and appraisers offering origin verification as part of their service.
Fourth, evaluate how jewelry is stored. Collectibles policies typically charge 1% to 2% of an item's insured value annually in premium. However, if jewelry is stored in a permanent safe or a bank vault, insurance premiums could fall to as low as 0.3% per year.
A good insurance broker can help optimize the policy. Patti Clement, executive vice president of Hub Private Client Group, says it is important for the underwriter to understand the wearing habits of the jewelry. 'There are creative ways to keep costs down based on how often items are worn outside the household on an average daily basis, along with how they are stored—whether in a home safe bolted to the ground, built into the home, or kept in a bank vault. For higher-valued items that are rarely worn, the savings could be substantial,' Clement says.
The diamond market is experiencing a structural shift. Prices are lower, authenticity is being scrutinized, and the old rules of value and permanence are no longer taken for granted. These changes have real implications for diamond owners.
Given the recent volatility in the stock market, it is easy to forget that diamonds may be part of your investment portfolio. However, if they are insured, appraised, or part of your estate planning, it is worth paying attention to the changes in the diamond market.