Securing the yellow metal

Tips for getting insurance cover and Renting bank lockers for gold.

With gold prices on the rise, investors are flocking to the yellow metal, both in case of jewellery and exchange traded funds (ETFs). However, the complications are much more for a jewellery buyer, especially when it comes to storage.

Insurance needs to be purchased to make sure that the products are covered. One also has to find an adequate storage facility, preferably a bank locker. As far as insurance goes, most assume that a fire or a burglary cover, or a combination of both is enough. Under a householder policy package, these two covers are supposed to give protection against the natural elements and robbers.

However, having this policy alone may not be enough. True, a burglary cover covers housebreaking, larceny and theft; and a fire policy extends to not only fire but other natural perils too. But both are not up to the mark. For instance, the fire insurance does not go beyond the house. So what should be done?

The best thing would be take an all-risk policy to cover the jewellery. Specified under Section 3 of a householder’s policy, the jewellery insurance cover meets unforeseen exigencies. The ambit of this type of insurance encompasses any loss or damage to ornaments and valuables by accident or misfortune when kept, worn or carried anywhere in India.

This has many advantages. For example, if you happen to leave ornaments in a room and they get stolen, the jewellery insurance policy would come to the rescue as it covers all risks. When jewellery is kept in a locked car and still gets stolen, the owner is entitled to insurance. This policy is enforceable even when you use a bank locker for storing your valuables. This would take care of mishaps like jewellery being stolen when being brought from the bank's locker.

The jewellery insurance can cover you, your children and your parents too. All their valuables, plus yours, can be brought under the canopy of a single policy. The only condition is that everyone must be permanently residing in the house.

If you find the premium for this policy too expensive, here’s a simple tip. Pay a premium for only that much jewellery which is kept at home. For example, if you have taken an insurance policy for Rs 3 lakh worth of jewellery but keep only Rs 50,000 worth of ornaments at home, buy an insurance cover of Rs 50,000 only.

There is another option which requires you to go in for a combination pack. For example, by taking five general policies – jewellery, fire, domestic appliances, burglary and baggage insurance – you earn a 15 per cent discount on jewellery insurance.

However, it is vital that the jewellery insurance covers the full value of the ornaments, or there could be a problem. For example, a person who has jewellery worth Rs 2 lakh in his house could have taken insurance of only Rs 1 lakh. Now, if jewellery worth Rs 50,000 is stolen, then the insurance company will consider the proportion of jewellery stolen viz-a-viz what was stored in the house. Accordingly, that person may get Rs 25,000 only.

SOME IMPORTANT POINTS TO KEEP IN MIND

 

When a house servant steals jewellery, the insurance company may not give any money because he is considered an employee. 
 

Some insurers do not cover your bank locker. Others may provide cover for loss of jewellery or precious stones only when they are kept in specified bank lockers. 
 

Ensure that you never send jewellery by a separate carrier. The claim does not pass muster in such a case. 
 

Unset jewellery must be mentioned as a special inclusion. If omitted, insurance won’t be given. 
 

Always take care of your jewellery to keep them in fine condition. Cracked, scratched or broken ornaments are rejected, even if the insurance policy is in order. 
 

Insurance companies do not entertain claims for losses suffered during cleaning or repairing. For example, you will not be compensated for a diamond or precious stone that falls from the ornament while undergoing restoration. 
 

One important aspect of getting an insurance policy is getting the valuation done accurately. Generally, a valuation certificate becomes mandatory when the value of one item is more than 10 per cent of the total sum assured. It is essential to furnish this valuation proof, otherwise the policy holder is paid only 10 per cent of the sum assured. 
 

While a valuation certificate is asked for ornaments of Rs 5 lakh or more, someone insurers insist on them even for jewellery that are worth only Rs 5,000. 
 

When you choose a bank locker, the most important thing to consider is the overall cost. Select a bank locker for which you just have to pay the rental, that is the annual charges only. The implication of this is that the bank should charge just the basic fees. 
 

If you are unable to pay the advance annual rent for three years, as some banks insist, then enquire whether a savings account for paying one year’s rent can be opened. Then continue payment for three years. This is allowed. 
 

Locker charges are usually in the Rs 500-5,000 range, unless you need a very big locker (10 times the size of a small one) which may have a rent of about Rs 20,000 a year. 
 

When the locker is being allotted, ensure that the key is brought to you in a sealed packet and opened in your presence. Don’t accept any loose key. 
 

Do not forget to ask for a copy of the hire-purchase agreement to ensure that the bank doesn’t demand a higher rent in future.