Gold buying in Diwali: What is gold insurance and why do people opt for it?

Gold shopping on Diwali: If you possess just one bar of gold, it is unlikely that you will require insurance beyond your existing home insurance policy. However, possessing multiple pieces of gold or a significant amount of gold jewellery requires exploring additional coverage options. Gold insurance or jewellery insurance has been an upcoming trend in the industry. 

Typically, companies offer gold jewellery insurance as part of home insurance, along with coverage for other household items. Some insurance providers may limit the coverage for gold jewellery to a maximum of 15% of the total sum insured under the home insurance policy.

Jewellery insurance in India provides specialized coverage for precious jewellery and valuable items like gold, diamonds, and other precious stones, safeguarding against financial loss. A comprehensive insurance policy should protect the entire value of your jewellery in scenarios involving damage, theft, accidental loss, or mysterious disappearance. 

Upon analysing the most recent market reports, it is evident that there will be a significant increase in demand for gold during the upcoming festive and wedding season, despite the escalating prices.

Presently, the average price for 24K gold stands at Rs 79,000. With a growing interest in gold investments and insurance protection, it is expected that there will be a surge in demand for insurance products during festivals and wedding ceremonies. 

Several prominent insurance companies are introducing specialized products to cater to this seasonal surge in gold purchases, thereby enhancing the necessity for financial coverage. Furthermore, some leading gold jewellers are entering into partnerships with insurance companies to provide complimentary or cost-effective insurance coverage to their customers this festive season.

"Over the last couple of years, gold insurance has become increasingly mainstream among consumers. This traction can be credited to several factors, including the cultural and financial importance of precious metals like gold and silver in India, as well as the increased disposable income of buyers. In addition, the tailored features and coverage offered by gold insurance add to its value. Typically, a gold insurance product covers losses resulting from fire, natural calamities, and allied perils. The coverage also includes snatching, riots, robbery, burglary, and accidents during transit," said Shilpa Arora, Co-founder & COO, Insurance Samadhan.

Gold insurance policies typically reimburse 95% of the value of the gold jewelry, excluding taxes and making charges. It's important to note that gold insurance does not cover replacements, sales, or items seized by the government, nor does it cover losses due to wilful neglect.

"We know that the demand for gold tends to surge sharply around this time of the year, a period marked by festivals and weddings. Nowadays, more consumers consider purchasing gold as an investment rather than just a symbol of wealth and prosperity. This fresh perspective is driving the demand for gold insurance, particularly among the new-age investors and consumers who want to protect their purchases against theft, accidental loss, and damage," Arora added.  

Gold insurance products

Gold insurance plans can be tailored specifically for individual gold owners, jewellery purchasers, jewellers, and businesses involved in gold transactions.

"Gold insurance products offer comprehensive coverage against several risks, such as accidental loss, theft, damage, misplacement, and burglary. While the coverage may be common, the plans and their extent of coverage depend on the type of policy buyer. Some of the most popular types of gold insurance that we can explore today include jewelry insurance, gold loan insurance, business insurance for jewelers, and bank locker insurance. Besides these plans, gold insurance can also be availed of as a rider or add-on to a home insurance policy. Similarly, insurance companies may offer tailored insurance plans for different cases and coverage needs depending on the type of gold item—coins, bullion, or jewelry—and their usage. Group insurance policies offered by jewelers also allow buyers to insure select products for a given year. Consumers are often given the flexibility to renew the policy directly with the insurer or through the jeweler after the first year," Arora said.