Engagement Ring, Who is responsible for insuring it?
An engagement ring is insured on an inland marine policy form, a type of property insurance. We know that two conditions must be met in order for a property insurance policy to pay for a loss. Condition 1. Insurable interest in the property is a necessary condition for payment under a contract of indemnity. You can make someone whole again only if that person has suffered a loss to the property. A loss will not result unless that person had an economic interest in the damaged or missing property. For example, New York defines an insurable interest as "any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage" [Insurance Law Section 3401], Connecticut defines an insurable interest as "an interest which is subject to a risk of loss through destruction or impairment of that interest" (Section C.G.S.A. 38a-1.10).
So the question is: When a man purchases an engagement ring for a woman, who has an economic interest in the ring, the man or the woman? The man purchased the ring and the woman is in possession of it. They both have an economic interest in the preservation of the ring. If something happens to it, the man will be compelled to replace it.
If the engagement is terminated, most jurisdictions recognize the conditional nature of engagement and, as a result, will decide in favor of returning the ring to the man, regardless of who was at fault. This is the stance taken in Connecticut [see Thorndike v. Demirs, No. CV05-5000243S (J.D. Waterbury at Waterbury, July 26, 2007]. When the engagement is terminated, the woman becomes a bailee and has a duty to preserve the ring from loss in order to return it to the man.
Condition 2. The second condition requires that the person having an insurable interest be designated as an insured under the policy. ISO eligibility rules for an inland marine jewelry floater permit naming the man and the woman as named insureds as follows: “A policy may be issued for engagement rings, wedding rings and guard rings in the name of the two individuals, as interest may appear, regardless of residence.” If for some reason it is not possible to get both names on the policy, I recommend that the man apply for the insurance. This is because the man purchased the ring and typically has a right to recover it should the engagement be terminated.