Physical gold allows investors to keep pace with inflation and mitigate portfolio risks from market uncertainty. Although you can buy gold shares and ETF To gain exposure to the precious metal, these investments do not give you actual ownership of the gold.
Gold shares and ETFs can dilute shareholders by issuing new shares, while physical shares precious metals are tangible assets that do not pose such a risk. Additionally, when it comes to investing in gold mining stocks, you need to trust that the third party managing your investment will make smart decisions.
And while buying physical gold requires more work since you’ll have to store the gold at home or in a safe place like a safe deposit box, its intrinsic value isn’t subject to the same market fluctuations that can affect stocks and ETFs. and even bonds.
However, it is important for any gold investor to insure their physical precious metals. This guide will explain how this process works.
Why insure physical gold
Physical gold insurance gives you financial protection if your precious metals are stolen or damaged. People usually insure their most valuable assets such as homes and cars. When it comes to gold, it’s the same story.
However, you will need a separate insurance policy for precious metals, since even best homeowner insurance policies will have limitations on coverage. However, you won’t find much flexibility with this type of coverage: Many homeowners insurance policies don’t cover gold or only insure up to $250 worth of precious metal.
This protection is not enough, so investors should seek separate insurance plans for their physical gold. Although this is an additional expense, it is worth it if you have to file a claim. Ideally, you would never want to use your insurance policy, but having one gives you peace of mind and an added layer of security.
How physical gold insurance works
Some insurance companies specialize in protecting you from financial loss if your gold is stolen or damaged. To insure physical gold, you will have to follow these steps:
Step 1: Find out how much insurance you need
You will have to count and weigh your gold and determine how many coins and bars you have. You will have to provide this information to the insurer, who may also require you to provide color photographs.
Step 2: Contact Insurance Companies
You should not stop searching with the first insurance company you come across. Contacting multiple gold insurers can help you find more competitive premiums and better coverage. Insurers will request a valuation of your gold to know the risk involved in insuring your physical assets.
Step 3: Compare rates
Each insurance company will provide a proposed contract that will include the rate and terms. You can compare premiums to decide which one is right for you. While price is a key factor, it’s also helpful to consider other details, such as the quality of a company’s customer support, reviews, and how easy it is to get reimbursement for a claim. Exactly the same as with online gold tradersIt is important to find a reliable insurance company for your physical gold.
Step 4: Agree to the contract
Once you find the best policy for your needs, the final step is to negotiate a contract. At this stage, your gold is insured and you will have to pay regular insurance premiums. If you ever need to file a claim, be sure to gather supporting evidence such as documents and videos.
How much does it cost to insure physical gold?
The cost of gold insurance typically ranges from 1% to 2% of the asset’s value. For example, if your gold is worth $10,000, you will likely pay between $100 and $200 per year to insure it. However, several variables come into play that can affect a policy’s premium.
Gold type
Rarer gold coins and bars insurance will cost more money. If the insurer can easily replace your gold, the premium may be lower.
Your location
Insurance companies charge higher premiums to people living in areas with high crime rates and a greater likelihood of natural disasters.
Your security procedures
Storing gold in your home and implementing safety protocols such as cameras and a home security system can result in lower insurance premiums. You can get higher insurance premiums if you keep your gold in a bank safe. Remember that your gold is not automatically insured just because it is stored in a safe.
Coating
Some insurance policies only provide partial coverage, while others offer full coverage. Getting an insurance policy that offers more coverage will result in higher premiums. You will also have to pay extra if you want to insure gold assets at a higher value, such as $10,000 worth of gold versus $3,000 worth of gold.
How much gold should you have?
Each investor has different preferences, but it is generally recommended to allocate no more than 5-10% of your investment portfolio to alternative assets such as gold.
As safe-haven assets that act as stores of value, precious metals can minimize the impact of inflation on your portfolio. Gold also tends to do well during periods of geopolitical unrest. For these reasons, the yellow metal is seen as a hedge that allows investors to reduce their overall risk exposure.
One of the strengths of gold is that it is not correlated with the stock market. Gold can perform well during stock market corrections and crashes. Or, as demonstrated in 2024, the precious metal can perform well along with the stock market as it sets numerous all-time highs.
Investors should analyze their portfolios and determine their risk tolerance before deciding how much gold to accumulate.
More money:
What is a Gold IRA?
How to Buy Gold in an IRA
What drives the price of gold?