Numismatic insurance Cleland and Associates

Frequently Asked Questions

Below are some of our frequently asked questions. If you have any other questions or concerns, please feel free to contact us.

  1. How do I know if I need insurance?
  2. How much insurance do I need?
  3. What should I look for in an agent/broker?
  4. What do I do in the event of a loss?
  5. When does a claim get paid, do I have to wait forever?
  6. Can I buy shipping insurance only?
  7. How are insurance rates determined?

How do I know if I need insurance?

To answer this question the concept of insurance needs to be defined. In its simplest form, insurance undertakes to protect the insured against monetary loss that is the outgrowth of the happening of some unfavorable contingency. Through the agency of insurance the burden of risk is transferred from the shoulders of the individual to whom it attaches to a carrier willing to assume it.

Now with this in mind, you only need ask yourself whether or not you are willing to assume the burden of risk. There is a cost involved in transferring the risk to someone else willing to assume it. Only you, are in the position to determine if the benefits of risk transfer outweighs the cost.

Several factors weigh into the decision of insurance needs, some of these are:

  1. Is there an insurable interest? For example, do you have an inventory of coins that would be in your interest to protect against the perils of the coin business.
  2. Can you afford a monetary loss that is the outgrowth of the happening of some unfavorable contingency?
  3. Would insurance enhance your business? Some consigners would never release their inventory to a dealer without insurance.
  4. Does a lender require the insurance on collateralized inventory?
  5. Finally, there is the peace of mind factor. Have you ever heard anybody say that "I sleep better at night knowing that I am protected"?


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How much insurance do I need?


If you've made the decision to insure against the perils of the business than you have to establish policy limits. If your insurance policy requires you to schedule your inventory then the process of establishing a policy limit is simple. If you have an open stock type, one where the inventory fluctuates from day to day, than you should insure the highest limits that you would have in any one policy period, normally a year. There is an exception to this, however. There is no need to insure a high limit when there is a small period of time when your inventory is unusually high. An example of this would be when a client consigns you a large inventory to take with you to the annual ANA show. In such cases you should seek a higher temporary limit for a short period of time. This will reduce you annual cost of insurance.

An important gauge in determining the amount of maximum insurance limits is an insurance policy's coinsurance clause. Standard coinsurance clauses require you to insure a certain percentage of your inventory, normally 80 or 90%. Coinsurance clauses enforce penalties for underinsuring.



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What should I look for in an agent/broker?


Selecting an agent for insuring your coin inventory is as important as selecting the coverage. However you will find that the selection process is easier than selecting an agent to insure your auto. The reason is that not many agents have the capability to insure coins, therefore, your choices are very limited. The coin dealers form is a very difficult form to underwrite for the main reason that the industry is not common (count the coin dealers in your town compared to restaurants or dry cleaners). An underwriter who writes one or two coin dealers cannot spread the risk within the class properly. All underwriters expect a favorable class loss ratio. One loss in a class book consisting of one or two dealers means an unfavorable loss ratio and one of two things will result; extremely high rates or loss of coverage.

When selecting an agent to insure your coin inventory the following should be considered:

  1. The reputation of the agent in the coin industry. This can be determined by asking other coin dealers with similar insurance needs.
  2. The ability of the represented insurance company to pay claims. Ask for an insurance company's industry ratings.
  3. The make up of the agent's book of business. This is particularly important because you don't want to be put into a "pool" of coin dealers that are likely to have claims and thus putting you in a class subject to higher rates and/or loss of coverage.


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What do I do in the event of a loss?


Insurance policies have clauses that require you to take certain actions in the event of a loss. These clauses should be referred to and complied with in the event of a loss. The following is an example of such a clause:

DUTIES IN THE EVENT OF LOSS

Insured must see that the following are done in the event of "loss" to Covered Property:

A. Notify the police if a law may have been broken.

B. Promptly notify the company of the loss. Include a description of the property involved.

C. As soon as possible, give company description of how, when and where the "loss" occurred.

D. Take all reasonable steps to protect the Covered Property from further damage. If feasible, set the damaged property aside and in the best possible order for examination. Also keep a record of your expenses, for consideration in the settlement of the claim.

E. Make no statement that will assume any obligation or admit any liability, for any "loss" for which we the company may be liable, without the companies consent.

F. Permit the company to inspect the property and records proving "loss".

G. If requested, permit the company to question you under oath, at such times as may be reasonably required, about any matter relating to this insurance or your claim, including your books and records. In such event, your answers must be signed.

H. Send the company a signed, sworn statement of "loss" containing the information we request to settle the claim. You must do this within 60 days after our request. The company will supply you with the necessary forms.

I. Promptly send the company any legal papers or notices received concerning the "loss".

J. Cooperate with the company in the investigation or settlement of the claim.

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When does a claim get paid, do I have to wait forever?

This is probably the most common and most difficult to answer of the FAQ's, frequently asked questions. Generally speaking insurance companies have a duty and an obligation to settle claims in a prompt manner. These obligations are usually enforceable and are usually part of the policy form. A common term in a policy condition is that the company shall pay a claim 30 days from

  1. the time they reach an agreement with the insured;
  2. The entry of final judgment; or
  3. The filing of an appraisal award.

Although 30 days is normally stipulated, a service oriented agent will insured that the claim draft is issued within 5 business days. However, note that this is 5 days from the date of finalizing the claim. The time involved in adjusting the claim is a different matter altogether. In every loss assignment, the adjuster must furnish the insurer with a report of particulars to justify admission of liability and amount of payment under the terms of the policy. The report usually covers the items listed below.

  1. Insurable Interest: Has the person who made the claim a right to do so under the policy. Is he a specified insured. If not, has he a right under the policy as a third party beneficiary?
  2. Property: Is the property involved insured?
  3. Cause of Loss: Is the cause of loss within the scope of the perils insured?
  4. Date of Loss: Did the loss occur while the policy was in full force and effect?
  5. Location of Loss: Did the loss happen within the insured location or territorial scope of the policy?
  6. Policy Conditions and Warranties: Have all policy conditions and warranties been complied with?
  7. Exclusion: Was the loss caused or affected by a peril which is specifically excluded from policy coverage?
  8. Claim and Recommendations: What amount is being claimed and what, according to the valuation clause in the policy, is the adjuster's determination as to the amount of loss?
  9. Salvage: Is there property involved that may be salvaged and how is this taken into account in the calculation of the amount of loss?
  10. Other Insurance: Is there any other insurance carried by the claimant, insured, or anyone else which may be called upon to pay or to contribute to the loss?
  11. Subrogation: Is there any third party who may be held responsible for the loss and what steps were taken to protect the rights of all concerned against such third party?
  12. General Remarks: Does the adjuster have any criticism of the insured; was there any misrepresentation or concealment by the insured when the policy was first written or about any matter pertaining to the loss; are there any irregularities involved; is the loss bona fide?
  13. Enclosures: Are photographs available? Can they show (a) damaged property or undamaged property where damage is claimed; (b) points of forcible entry in burglaries; (c) scenes of serious thefts or other casualties? (Photographs surpass the best word pictures.)
  14. Documents: Original signed statements, original shipping documents and pertinent records kept by the insured in the regular course of his business (including receipts, invoices, appraisals, bills of sale, cancelled checks and other evidential data) should accompany report to the insurer.

The foregoing data are usually obtained by the adjuster through any or all of the following means:

  1. Interrogating the person making the claim, the insured and all other interested parties and witnesses.
  2. Checking with police and official authorities involved, if any, for facts related to the claim.
  3. Auditing books and records; checking original purchase sources or appraisals to establish identification of property involved, quantities, and values claimed; and establishing ownership.
  4. Inspecting and appraising property involved in cases of damage.

The adjusting process and it's complexity determine the time when a claim will be settled. Some claims take less time than others but there is no true answer to the time question. The cooperation of all involved usually lead to the most expedient claims settlement.



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Can I buy shipping insurance only?

So you've asked yourself question number one of the FAQ's and have determined that you are willing to assume part of the risk but something tells you that other risks are best transferred. You probably made this determination because you have heard or have experienced the perils of the specific risk that you do not want to assume. Chances are that the insurer has experienced the same risk. Therefore, to answer this question there may be an insurer out there, somewhere, who may take on only the riskiest of perils or situations, but they are going to charge you for it. If you are going to insure against the perils of the business you are better off with a comprehensive insurance program that would insure against all facets of your business.

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How are insurance rates determined?


There is no great mystery about the conduct of the insurance business. It is sometimes not quite clear to the layman how any organization can assume a large risk for a comparatively small premium and, when called upon, make payment immediately after commitment. The insurance company, in the case of coin dealers, is not necessarily interested in whether a specific coin dealer will suffer a loss, but what will be the loss ratio when a large group of dealers is considered. The equality between the receipts in the form of premiums and what is paid out in losses constitutes what may be termed the insurance equation. Certainly an insurance company cannot remain solvent unless it takes in enough funds in the form of premiums to meet all losses. In insurance, as in other business transactions, it is impossible to get something for nothing.

In addition to securing sufficient funds in the form of premium payments to meet all losses, insurance companies must be able to carry on the business.

A rate structure is formulated to ensure an equitable situation for both the insurance company and the insured. In the case of coin dealers, rates have been classified and vary according to amounts of insurance and the risk involved. The following simple factors are included when determining the rates after a rate class has been identified.

  1. Limits of Liability
  2. Deductibles
  3. Frequency of Exposure: As in the case of show attendance and shipments via courier.
  4. Protective Measures (i.e. safes, fire alarms, burglary alarms)
  5. Loss Experience



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