Insurance for NFA items?

[Sharkbite]

I just got off the phone with my ins agent. Asked about adding my coming Suppressors and SBR's to my personal items policy.

I carry extra ins on my gun collection over and above what the homeowners policy covers

I was told that because the NFA items are "owned" by a trust that i cant add them to my "personal" policy

Anybody looked into Ins for items on a trust?

[Machineguntony]

Since no one has chimed in, I will throw in my two cents.

I would never buy insurance on guns, especially NFA items like a silencer. A machine gun...maybe.

Insurance is a negative expectation proposition, meaning it is like going into a bank, giving the bank $1, and getting back 99 cents. Insurance should generally only be purchased under three conditions: 1. it is a legal requirement (car insurance to drive); 2. it is contractually required (like homeowners insurance to get a mortgage); 3. to prevent ruination (a loss so bad that you will never recover and be able to live at your current position).

As an example, people often buy the stupid extended warranties, which is a form of insurance, on a TV because the TV is expensive and it might break. Never mind that the TV has a manufacturer's one year warranty, or that most TVs, if they have warranty defects, break within the first year of usage, but the insurance on the TV does not meet any of the above three requirements. It might be expensive if it breaks, but it will not ruin you. You are better off putting the money for the warranty into a repair or new TV fund. The extended warranty has a higher profit margin than the TV.

Same thing with gun insurance. Gun insurance is a huge rip off. These types of policies are high margin items for insurance companies.

You might think, well, if I am a victim of theft, at least I will get my money and that is worth piece of mind. True, but you are paying a premium for that piece of mind.

But to answer your question directly, assuming you still want to buy insurance on your NFA item, it is possible to find insurance. You can find a nontraditional route of insurance (for example, Lloyd's will insure anything), or you can have your current underwriter or carrier carve out a special term for you. If they won't, then you just have to shop around. You can find insurers to insure anything.

The trust would have to purchase the insurance, but you can designate yourself as a beneficiary of the policy, so in essence, you are buying insurance for yourself.

As for insuring your silencers, you should be careful. Most policies pay something similar to a market value, NOT replacement value (although you can get replacement value policies, it just costs more, and you should be sure what you are buying). The resale market on used silencers is almost nonexistent. So don't be surprised if you pay for decades worth of premiums, and then when the burglary happens, the adjuster pays you $50 on a suppressor that cost you $500 and a $200 stamp. Surprise!

I personally do not have insurance on my guns. Instead, I use the money, that I would have spent on insurance, on a nice and advanced surveillance system.

Anyways, none of the above is advice, so you really shouldn't believe anything that I've written.

[Theohazard]

I'm with Tony: I had a friend once who was a super-smart insurance actuary, and he told me never to buy insurance on something you can afford to pay for out-of-pocket. (Tony, he also used the extended warranty insurance offered for electronics as an example.)

On average, you're going to lose money on insurance. But often insurance covers things we couldn't afford to pay for out of pocket. I've paid a lot more in car insurance than I'll probably ever get back, but if something crazy happens I could end up owing more than I could ever afford. That's why insurance like that is often useful.

Like all insurance, chances are you'll save money if you don't insure your silencers, and if you can afford to buy new ones immediately if they're stolen then I can't see any good reason to insure them.

[Brian Pfleuger]

I have to agree.

Insurance is a lot like gambling in reverse. You're basically betting that what you DON'T want to happen WILL happen and the "house" (insurance company) is betting that it WON'T happen.... although the premiums are often high enough that unless it happens very early on the company wins either way.

I would not consider adding a separate policy for items that were only a few thousand dollars at most... unless the policy was IMPOSSIBLY cheap, like $1/year or something.

[Beretta686]

I spend about $600 a year on my insuring my substantial gun collection which includes several MGs and other NFA goodies held by a trust through USAA's valuable property program.

It may not be a good ROI, but my peace of mind knowing that whatever happens to my ~$25k M16, I won't be stuck-like-chuck is worth $600 to me. YMMV.

[Brian Pfleuger]

"Several machine guns and NFA goodies" is a far different situation than "suppressors and SBRs".

[medalguy]

Well, I've had an M16, 1921 Thompson, and a number of other goodies since the 1968 amnesty. If I had paid $600 a year for insurance from 1968 to today, that would be $27,600 in premium receipts I'd have in my hand instead of a couple of nice guns.

[studentcon]

I felt compelled to respond to this old thread because I believe it includes some not-so-great advice.

Although I certainly understand arguments against insurance, one of the posts above somewhat mischaracterizes its benefits. Most understand that the premium that is being paid is for a promise to indemnify (make whole) someone who suffers a loss under the terms of the insurance policy. Yet, the moment you pay a premium you will never get back what you "put into" the insurance. But, that's not the point.

A large safe in a great location can serve well to "insure" your firearms. But not everyone is so lucky. If you live in a high crime area, or don't own a safe, then insurance may be the best way to avoid total loss after a theft. More importantly, you can consider the payments to your insurance policy (much like the investment in a safe) as payments toward the peace of mind knowing that in nearly all cases, your guns are "safe."

As for the advice regarding just "adding yourself as a beneficiary," this is not necessarily correct. The process is a little more nuanced. Without getting into Trust Law 101, the simplest way to explain it is that if you are the sole trustee, you cannot be the sole beneficiary (doing this would effectively end the trust and title to the firearms in the trust would inure to the person named as the trustee/beneficiary). You don't need to do this anyway. If you're a trustee (which you should be if it's "your" trust), then you can insure the trust (and, if you look at the fiduciary duties of trustees in your state, this may be close to a requirement anyway). Either you would have to setup a separate insurance policy, or some insurers will allow you to add the trust as an additional "insured" under your pre-existing property policy (most of which cover guns, up to a specified limit). The reason that you would be able to add the trust to your existing policy is because most NFA trusts are revocable living trusts. Again, without getting into all the details, this is a common scenario and a simple call to your agent asking about this (and getting them a copy of the trust for the underwriting department) can fix your issue.

Remember, when you put a gun into the trust you're splitting title between the trustee (legal title) and the beneficiary (equitable title). You no longer own the gun. Now you own the gun with the beneficiary, except you're holding it in "trust" for the beneficiary per the terms of the trust. (A simplified, but incorrect, way to think about this is that the "trust" owns the gun.) This is why you either have to add the trust as an insured to your policy or setup a separate policy. Your personal policy only covers things you own - therefore, items in the trust are not covered.

Anyway, I hope this post clears some things up and maybe corrects some of the advice given above.

(PS - nothing in this post should be considered offering legal advice.)

[Machineguntony]

PS - It's totally legal advice you just gave. You're so screwed now!

[Skans]

MG Tony laid out my same sentiments on the insurance thing very nicely!

[johnwilliamson062]

About 30% of premiums go towards commission, underwriting, claims adjusting, etc.

About 70% is paid out in settlement.

Insurance companies have traditionally made their big profits in the stock market. They collect the premiums up front and invest it while they pay out the expenses and claims over a period of time. Of course, this only works when the stockmarket trends up.

It is easy to say you shouldn't insure things that won't cause ruination.
Most of us would feel ruined if we had to wait 6 months to watch Dr. Phil while we saved up for a new TV.

[Elkins45]

I would have to pay my current gun insurance premium for 184 years to equal what my guns would likely cost to replace at today's value. A 1/184 bet against their total loss seems a reasonable investment to me.

I wouldn't be ruined if I lost A gun, but I would be financially (and emotionally) harmed if I lost ALL of them.

Telling even a moderately serious gun collector not to insure their guns is about like telling the average middle class family not to insure their home against fire. Sure, you COULD live in a tent on the still warm slab of your former home, but wouldn't you rather have a nice premium check with which to rebuild?

[Theohazard]

Originally Posted by Elkins45

Telling even a moderately serious gun collector not to insure their guns is about like telling the average middle class family not to insure their home against fire.

That's a bad analogy for two reasons: One, most people's gun collection isn't worth anything even close to what the average house is worth; and two, most people's houses are a lot more important to their daily lives than their guns are.

[Elkins45]

That's a bad analogy for two reasons: One, most people's gun collection isn't worth anything even close to what the average house is worth; and two, most people's houses are a lot more important to their daily lives than their guns are.

It wasn't intended as advice for most people...but many of the people who participate in firearm forums are probably outside the norm. I agree it's not a necessity for the guy who owns 5-6 Walmart grade guns.

[Theohazard]

I'd say it's not good advice for the vast majority of people on this forum.

The average price for a house in the US currently is about $230,000. Now, let's be generous and say that the average gun owned by folks on this forum is worth about $800. That means that you'd need to own almost 288 guns to equal the price of the house. Even if you owned more expensive guns and your average gun worth was $2000, that still means you own 115 guns.

So it's pretty likely that there aren't too many forum member here who own anywhere close to $230,000 worth of guns. I know of a few who probably do, but for the vast majority of us you simply can't compare a house value to our guns' value.

[johnwilliamson062]

Theo,
I'd bet more than a few here own firearms exceeding their house value. I'd bet most of those don't have a $230,000 house.
I live in the midwest. $280,000 can get you about 4000SF in a pretty decent neighborhood. 2000SF in the best. Not a fixer upper either.

A fixer-upper in a bad neighborhood can be had for $5000.
A double wide nearly free if you pay the lot rent.


I do agree with you though. The basic insurance should cover most peoples EDC and a goto long-gun. Everything else shouldn't cause much hardship if it is lost and insuring is a net-loss on average(30% or so).

[Theohazard]

Originally Posted by johnwilliamson062

I'd bet more than a few here own firearms exceeding their house value. I'd bet most of those don't have a $230,000 house.

Fair enough; I took the average nationwide cost of a home and figured very few people here had guns worth that much. But you're right: There are probably a lot more people than that here who happen to live in inexpensive homes and also happen to have a lot of guns and/or very expensive guns. But I'll bet they're still in the vast minority here.

Originally Posted by johnwilliamson062

I do agree with you though. The basic insurance should cover most peoples EDC and a goto long-gun. Everything else shouldn't cause much hardship if it is lost and insuring is a net-loss on average(30% or so).

Yeah, and that's why I think Elkins45's analogy in post #12 didn't make a lot of sense.

[Skans]

So, if I should have all of my guns insured; and if I can't afford that kind of insurance premium, then I guess my only alternative is to sell off everything I can't afford to insure.

[Skans]

deleted - duplicate

[9x19]

(That poor horse)

Why should you have all your guns insured?

[taymag]

From what I remember when I posted this same thing on the AR15 forum about a year ago I got quoted around $120 for 15k insurance. I didn't find this to be too bad. I think most of it for me was peace of mind knowing IF everything got stole, etc I would be covered. Sometimes peace of mind is worth a few bucks. I mean.. half of us spent $120 since Monday on something less important I'm sure. If you want a "get insurance" crowd point of view post on ar15 forum. I ended up not getting it though

[9x19]

Just put $20 / week in a bank account... and leave it alone. The funny thing is, people will give money to a 3rd party and expect payment for loss, but putting it back in their own name, they soon forget why they started and ear-mark it for something else.

$1040 / year adds up fast and you'll soon have a nice little account that will replace your firearms should they be stolen. Just remember what that money is for and why you put it there instead of in the hands of some insurance company.

[taymag]

lol how is that relevant to $100 a year for like 15k in insurance? Possibly even 20k in insurance... Whoa in 20 years ill have $2000, impressive