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Buying a bonded diamond?


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‘Bonded’ is another word for ‘warranty’. Not all warranties are the same and not all customers value the same attributes. The jewelers that use this particular term tend to be aiming for giving a customer a specific impression based on a popular book called ‘How to buy a diamond’ that uses the word frequently and loudly. There are several different attributes to consider with bonding/warranties.


1) Trade in programs. Many dealers have offers to allow you to trade your stone for a bigger one under certain circumstances. The usual offer is something like a credit against your new purchase for the money paid for your previous purchase as long as the stone and the related paperwork are undamaged. Variations on this will include requirements that you must spend more on the new stone than you did on the old one, that you must pay for reissuing the paperwork after a certain time or that you only get a certain percentage of your original money. 100% credit for your purchase against a new purchase that is at least twice is big with no additional fees is pretty common. Be prepared for charges to modify the setting to accept the new stone. For most customers this benefit is over-rated but it may be valuable if you are planning on upgrading soon. In any case, I wouldn't suggest paying much of a premium to get it. Lots of jewelers offer this although most don't try to call it bonding.


2) Refund periods. Most reputable dealers will offer you a certain amount of time to return your diamond for a refund. This time will range from as little as 7 days to as long as forever. Forever is, of course, a pretty attractive offer but it’s not as valuable as it first appears for most customers. Like most things, diamonds have inflated in value fairly consistently over the years. This is generally expected to continue. For a dealer, the opportunity to buy back stones from consumers at 10 year old prices is actually pretty lucrative. Many dealers will be happy to do this anyway but it will depend on the original markup on the stone. If you hold the stone for more than 5-10 years, you probably won’t want to sell back on this policy anyway. You are effectively lending your money to the jeweler for 0% interest. As with the trade-in, both the stone and the documentation must be undamaged and in saleable condition and these programs rarely include mountings or the labor components. As with the above, I wouldn't pay much of a premium for this but it can be comforting if the prices and products are otherwise good. Never buy a stone that doesn't have some sort of a refund period where you can examine the stone and return it if you aren't happy.


3) Breakage. Diamonds can break. This is contrary to what many people believe but it’s simply a fact. When the jeweler ‘guarantees’ that their stone won’t break, they are effectively giving you an insurance policy against that particular issue. They aren’t saying that their stones can’t break; they are saying that if they do, the jeweler will replace it. Full policy jewelry insurance costs about 1%/year in premiums. In addition to covering breakage, this will include other forms of loss as well (fire, theft, etc.). Most people end up buying an insurance policy without regard to where they buy their diamond so they are actually buying double coverage and this guarantee against breakage is useless. Most of the ‘bonding’ programs have a fee that ranges from 1%-2%/year after the first year to keep their insurance in force. This seems like mediocre and expensive insurance to me. If you want an insurance policy, buy it from an insurance company. It's a very competitive business and there some excellent companies involved.


4) Better diamonds. This is simply not the case. There are jewelers that sell quality diamonds with stripped down warranties and others who sell crap with fabulous support. They may be selling a fantastic stone but the presence of a warranty is not evidence of this.


5) Money. As you point out in your original question, all of this costs extra. Sometimes it’s quite a bit extra. Some people find all of this valuable and are willing to pay the premium prices required while others prefer a more bare-bones type of purchase in exchange for other things. It's fairly easy to find similar stones that you can compare and figure out how much extra the 'bond' costs. From that you can decide if you want to buy it.


A generic observation on bonding/warranties/insurance. These policies are only as good as the company that issues them. A lifetime guarantee from a company that's only been in business for a few months or that has a history of poor customer relations may not be as valuable to you as a policy issued by a AAA rated insurance company.


Neil Beaty


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