Appreciating and protecting your Family Heirlooms.

• Author: Paolini, John
• Position: Life in America

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IF YOUR INSURANCE has not kept pace with skyrocketing gold and other precious metals prices, your jewelry may be at risk. Gold, silver, and platinum have risen dramatically over the past decade, outpacing many other asset classes. The price of gold and silver has more than quadrupled--and platinum nearly tripled--over the last decade, and most of the appreciation occurred during the last five years.

This multifold increase has been driven by a variety of factors, including the high demand for jewelry in large, emerging-market countries, and greater interest in precious metals as a safe investment during times of economic and political instability. Some specialists in the field say a bubble is forming, one similar to other asset bubbles, but others indicate that gold costs could continue to rise into 2014.

While most investors in precious metals may track prices closely on a daily basis, they are unlikely to consider how much their jewelry, silverware, and other collectibles have appreciated in value. Roger Ponn, a Chicago appraiser who has been in the business for more than four decades, points to the example of a longtime client's jewelry collection that he reappraised. In 2004, the collection was valued at $384,000. Six years later, its value had risen to $682,000. The increase simply was the result of price spikes in precious metals and diamonds over that period.

Ponn cites another example, that of a high net worth family in Wyoming who saw their jewelry collection of more than 400 pieces increase in value by 45% over two years. Its high quality made the value rise more than it would have for most collections.

"Quite a few of their handmade pieces were 22- and 24-karat gold, with 24-karat, of course, being pure gold," explains Ponn. "Higher karat content means faster price appreciation, when precious metal prices rise. This is similar to what occurs with gold bullion and gold coins, which appreciate more rapidly than most gold jewelry, simply because they are made of pure gold."

Since a lot of people do not realize just how much their jewelry and precious metal items have appreciated, they have not adjusted their insurance coverage, creating a growing gap. A heavy gold necklace or an heirloom silverware collection acquired years ago may be insured for only a minor fraction of the cost to replace it at today's prices.

"We have seen clients underinsured across all categories of valuable articles, including jewelry,"...