Owning gold and silver coins or bars is one thing. Storing and insuring them from loss is another.
With uncertainties continuing to dominate equities and bonds markets, many investors are choosing to entrust larger percentages of their portfolios into precious metals including gold, silver, platinum, palladium, and copper. Precious metals prices tend to run inversely to the stock market, making them an attractive hedge against inflation and market downturns. Historically speaking, gold spot prices have reached peaks when stocks have hit major lows.
The matter of where and how to store one’s investment in gold and other precious metals, however, can be the biggest challenge of precious metal investing for some. Unlike stocks and bonds, owning gold is more involved than merely possessing a certificate of ownership. If a stock certificate is lost or destroyed, a duplicate can be issued.
If a piece of gold bullion is lost, stolen, or destroyed, the loss can be unrecoverable—unless proper insurance measures are put into place.
Self Storage and Home Insurance
Some choose to store their precious metals in stand-alone or built-in safes in their homes or places of business, trusting that their property insurance will protect their investment from loss in the event of theft, fire, or other potentially disastrous events.
Before choosing this option for safekeeping, we highly recommend checking the provisions of your property insurance policy. Many insurance policies only pay up to $250 total to replace the cost of coins, bullion, and similar types of items of value.
Another disadvantage of relying on home insurance is that these policies often limit the amount of valuation assigned to precious metals, usually up to $2,500 total. Some insurance companies will allow homeowners to increase the coverage amounts for special items of value such as jewelry, sterling silver, and other precious metals, but the process can be difficult.
For example, even with the additional coverage, it can be difficult to recoup the investment losses because of insufficient loss payment from the insurance company. When the items are insured, it’s usually at the current market value of the metals. However, when a claim for loss is processed, most insurance companies use wholesale prices as their basis.
The insurance problem is further compounded if the insured items include rare coins. Insurance companies use standardized models for calculating values and compensation, and these often miss the mark when it comes to true valuation of rare coins.
If sufficient insurance coverage for home storage is obtained, the matter of proof of ownership in the event of loss is another challenge. In order to claim a loss, extensive documentation is usually required and may not be easy to acquire.
It’s possible to secure additional coverage through a different technique, known as “scheduling items.” Using this method, the owner of the precious metals adds an amendment to their existing policy which itemizes the assets, along with their valuations. In order to determine the correct valuations, it will be necessary to have the items professionally appraised and the insurance company will have to agree to cover the items for the appraised amounts.
The disadvantage to this technique is that the coverage is written according to appraised values at the time of issuance. If a loss occurs, payment will be made based on the coverage and will not take fluctuations in value into consideration, such as those that may be caused by inflation.
Bank Safety Deposit Boxes
While renting a safety deposit box from a bank may seem like a better choice than a home safe, there may be reasons to rethink this option as well; one being that safety deposit boxes in the United States aren’t insured by the Federal Deposit Insurance Corporation (FDIC), and most banks don’t purchase insurance coverage for their customers’ safety deposit box contents.
This means that a disaster such as a tornado or a hurricane could wipe out a bank building, including the safety deposit boxes, with no insurance protection for their contents.
Private Vault Depositories
This option is most likely the best choice for precious metals investors who have substantial value in their investments and need optimal insurance on the safety, security, access, and protection of their assets.
Private vault depositories are managed by third-party companies who specialize in securely storing precious metals such as gold bullion, silver, platinum, and valuable coins. Unlike banks or individuals, these companies are knowledgeable about the unique needs and requirements of precious metals investors. Many times, these companies take care of the purchase and sale of the items, as well as transporting and insuring them. Market values are monitored for insurance purposes and clients have the added benefit of being able to monitor their assets remotely via a secure website.
This option also provides superior accessibility to investors since their assets can be delivered at any time, regardless of the hour of the day or if it’s a holiday or weekend. And most depositories offer their clients the additional assurance of meeting their liquidity needs by liquidating the assets and transferring the funds to the client’s bank account swiftly and confidentially.
Summing It Up
Investing in gold, silver, and other precious metals is a popular way for investors to diversify their portfolios to minimize the risk of a market downturn. However, it’s just as important to store these assets in a way that not only provides for their safekeeping, but also ensures them against loss.