Can Precious Metals Be Insured?

Can Precious Metals Be Insured?

Can Precious Metals Be Insured?

June 28, 2024 1572 view(s)

Owning chunks of physical gold may sound like an anachronism from the days of the Wild West. However, precious metals are still worth investing in even today. 

Metals are a liquid asset, meaning they're easy to convert into cash. Their tangibility also offers a security you can't get from many other investments. Precious metal's rarity and utility always ensure it's always in demand.

But what happens if someone steals your precious metals? Many people are storing precious metals at home, which can be problematic in the case of burglary. So can precious metals be insured? 

Many readers may wonder how to protect your precious metals and if these items are worth investing in. Keep reading to learn if metal investing is worth it. We'll also discuss if metals can be insured and how to do it. 


Why Invest in Precious Metals?

There are three reasons why precious metals are a worthy investment. The first tidbit is that precious metals are liquid assets that're quick and easy to turn into cash. 

What Are Liquid Assets?

Liquid assets are similar to cash because of how fast you can exchange for cash at any time. Certain factors must exist for an asset to be considered liquid. The asset must exist in a liquid market. 

In a liquid market, many buyers and sellers can exchange items with low transactional costs. The opposite is an illiquid market with fewer sellers and larger gaps between the highest available buyer and seller. 

The second factor that makes an asset liquid is easy ownership transfer. High liquidity matters because it's easier to get ahold of spendable money when needed. 

 

Precious Metals Are a Store of Value

The second reason to bother with precious metals is because they're a "store of value." A store of value is an asset, commodity, or currency that maintains its value instead of depreciating over time. 

Put another way, these items either keep their same price or increase in value. These assets and commodities are often liquid. 

The US dollar, and other nations' currencies, are ideally a store of value. They must keep the same value for a stable economy. U.S. Treasury bonds also count because they retain value while generating income.

Most vehicles aren't a good store of value because they depreciate rapidly. Electronics are also a poor store of value due to depreciation. 

Precious metals keep their value for long periods and are easily exchangeable for different cash denominations.

Precious metals also usually skyrocket in value during times of economic instability. They were such a stable asset that the US was on a gold standard. 

The gold standard is when a nation's currency or paper money has a direct valuation link to gold. Dollars were exchangeable for a specific weight of gold up until 1971. 


Precious Metals Have Practical and Rarity Value

Do you recall learning about renewable and non-renewable resources in school? Solar energy, falling water, wind, and geothermal energy are renewable because they come from readily available sources.

Oil and coal are non-renewable because it took millions of years to gain what we have. Precious metals work the same way, there aren't a lot of readily available sources these substances come from. 

Gold, silver, and other precious metals are rare and, as such have rarity value. They fetch high prices because it's easier to buy them from another person than to mine. 

Precious metals have high practical value too. They're often used inside electronics like circuit boards, computer chips, cell phones, and capacitors.

These devices are integral to modern life. People will pay large amounts for enough metals to ensure these items work. 


 

Can Precious Metals Be Insured: How to Store and Protect?

So, owning precious metals seems worth the effort -- at least regarding their value. But how do you protect them; can you insure precious metals? 

Yes, precious metals can be insured. However, the kind of insurance you have depends on the storage method. We'll discuss storing precious metals and the kinds of available insurance. 


Vault Storage

The first of the three storage methods we'll go over is vault storage. Vaults are located within precious metal depositories. These facilities are where you can securely store your tangible assets.

You can place any precious metal within a vault. Vaults are unique because they're the only place to store gold, silver, platinum, or palladium for retirement. 

This "retirement fund metal" is part of your IRA or individual retirement account. Storing IRA gold elsewhere is considered private possession. 

The IRS (Internal Revenue Service) prohibits private storage of IRA metals because they consider this taking a distribution. To clarify, taking IRA distributions isn't prohibited. 

The issue with keeping gold meant for your IRA at home is that it's not a government-recognized financial facility. As such, keep gold at home as part of your IRA unless you count it as a distribution. 

Keeping IRA gold at home isn't illegal, per se, but it is unadvised. Distributions are taxable until you're 59½. You could see taxation on metals and a 10% penalty fee if you're younger than 59½.

That aside, all you have to do is find a trusted depository and ship your precious metals. They'll secure the metal until you withdraw or sell it. 


Vault Insurance

Vaults have various physical and cybersecurity measures to keep your metals safe. But there is a chance outside forces can circumvent this. That's why vaults also offer insurance. 

Ideally, your depository will have comprehensive insurance if your metals are stolen, lost, or damaged. Here are some insurance considerations to account for when choosing a precious metal depository: 

Type of Coverage

Search for all-risk policies that cover a broad range of incidents:

  • Theft
  • Loss
  • Damage
  • Natural disasters


Coverage Amount

  • Coverage should encompass the total amount of your investment
  • Some depositories offer scalable insuranceThis is based on the value of your stored assets


Underwriters

  • Specifically, check the institutions doing the underwriting
  • Choose reputable insurers with strong financial stability


Consider investment assessability as well. For example, does your chosen depository allow for physical withdrawal? Are there any restrictions you should know about?

Ask if you can view your holdings and transaction history online. The ability to request withdrawals online is also convenient. Lastly, inquire about the depository fee structure. 

Look into how much the storage fees are. These are usually annual and are fixed or a percentage of your metal's value. Storage costs can range from hundreds to thousands of dollars.

There may be transaction fees when the company charges you to buy, sell, or move gold within the depository. Some places include insurance fees as part of storage costs.

Other precious metal depositories include insurance as a separate charge. Ensure these, and your other costs, are transparent. 

 

Bank Storage

Bank storage is the cheaper version of vault storage. It also comes with the perk of accessing your precious metals during bank hours, or with an appointment.

A depository is a secure (often far-off) facility that may not allow physical withdrawal. Instead, they make the gold accessible to you.

Not all banks offer safe deposit boxes, but ones that do have boxes of varying sizes. Prices can range from tens to hundreds of dollars depending on box size.

The issue, though, is that these boxes are small. The largest box you can expect is a 10-inch by 10-inch deposit box at hundreds of dollars. 

Once the bank gives you the only copy of the key after you sign the agreement for your safe deposit box. Your bank staff cannot access what's inside. 

The bank will charge a drilling fee if you lose your key. The drilling fee is what it sounds like, it's a charge to have someone drill the box open. Here are a few factors to consider: 

Accessibility

  • - Check when safe deposit boxes are accessible
  • - Some banks may not allow access during regular banking hours
  • - SecurityWhat identity authorization does the bank request?
  • - How do they keep unauthorized people from your box? 

Your final consideration is insurance. Items inside safe deposit boxes aren't FDIC-insured. The FDIC, or Federal Insurance Deposit Corporation, is a government agency that protects banking clients who lose deposits. 

This insurance protects depositors in case FDIC-insured banks fail. All FDIC banks automatically insure the money inside the bank, but nothing inside the deposit boxes. You'll have to buy separate insurance. 

 

Home Storage

The final choice of storing precious metals at home is a favorite. People like having their gold under their control at all times. But there are issues; your home simply doesn't have the same security as a depository or bank. 

There is also the matter of insuring your metals against loss, theft, or natural disasters. Here are a few factors to consider when choosing home storage: 

Location:

  • Extreme temperatures and humidity are bad for metals
  • Humidity in particular can tarnish silver and gold
  • You may have heard of people burning gold and silver. Don't do this, exposing it to the elements may damage it
  • Opt for an interior home safe instead


Security

  • Don't choose a safe that's easy to pick up and run off with
  • Consider investing in a home security system 

You can use your home insurance for precious metals, but it might not be enough for full coverage. Even extra coverage probably won't offer enough coverage for any metals stored at home. 

You can get a floater policy. Floater insurance is a policy that covers easily transportable personal property. Floater policies also protect what your regular home insurance can't. 

These "personal property floaters" can cover things, like precious metals, jewelry, gaming consoles, and computers. You can also use a personal property floater to cover items within a safety deposit box. 

 

 

How Does Floater Insurance Work?

Floater insurance has professional appraisers estimate the value of each item you want to ensure. If the item is lost, stolen, or damaged, your policy compensates you for its full value. 

Float policies only cover one item at a time. You'll have to insure multiple items separately.

Some people opt to go without insurance altogether. They don't want people to know they've got gold at home. Doing this risks you losing your investment with no contingencies in place without some form of insurance. 



What Is the Best Way to Store Precious Metals?

Owning precious metals is more complex than buying them and shoving them under your bed. Some may argue that vault storage is the best option. 

Vaults are within a secure facility and insurance is a given. How you pay for it depends on the facility. Something you should account for is how many precious metals you've got. 

Three bars aren't much cause to buy a vault, which could cost thousands of dollars in storage fees. You can opt for a safe deposit box or home storage. But then you have the issue of finding good insurance. 

The storage method should depend on how much precious metal you've invested in and your preferences. Just make sure you carefully consider each choice. 

Here are a few things to keep in mind when storing precious metals. Consider insurance, your investment is protected if something like theft or a natural disaster happens. 

Don't choose low-quality storage. Weak home safes or unverified precious metal depositories may save you money, but possibly not your investment. 

Your metals are essentially money. Protecting them is worth a few extra dollars. Keep investments confidential and don't share details with anyone not involved with (or affected by) your investments. 

Finally, don't mix your investment with scrap metals. Keeping your investment metal pure helps maintain its value. 

Can precious metals be insured?Can precious metals be insured?

Your Guide to Owning Precious Metals

So, can precious metals be insured? Yes, but how good it is depends on the storage method. Depository vaults may have the best insurance. Safe deposit boxes and home storage may require floater insurance.

Did reading this inspire you to buy precious metals? The United States Gold Bureau can help. We offer rare and modern U.S. and foreign coins and currencies. 

You can count on fair, professional service and up-to-date precious metals information. Reach out for our free investors' guide -- it'll help get you on the right track.