Do stamp dealers carry insurance on their stamp stock? How is the insurance coverage determined - I would imagine that their stock changes frequently. Do they just carry a certain dollar amount? How do they prove loss in the event they need to file a claim?
Is it easier for larger companies like Mystic who may have staff to document what is in stock and what is sold? How would a regular small time dealer handle it?
You insure for a certain amount. If you belong to the APS, check out the contract insurance carrier. Give them a call to discuss your needs. Don't go by what other people may tell you regarding as to what they pay and what their coverage is, except as a very rough estimate. What you would actually pay for a premium and what coverage you get will depend on your circumstances.
I'm not a dealer. I was asked how insurance would work for a dealer whose inventory would change frequently and figured someone here would know. Thanks Michael!
Insurance premiums for dealers is higher than for collectors. Since the insurance policy is for a dealer, I'm sure the changing inventory is considered in the premiums and coverage.
The last time I checked for coverage, one of the first questions I was asked is, "Do you sell stamps?" I answered that I did to sell off duplicates. That put me in the dealer category.
If a stamp dealer files his taxes with an inventory figure rather than carrying a -0- balance and using cash in and cash out then the inventory figure carried on his taxes and his day to day accounting would serve as a "checks and balances" figure. Michael is correct that when you purchase insurance it is for a set amount.Thinking back to when I had dealer insurance I believe that if a dealer were to make a substantial purchase, say a few thousand dollars, a phone call to increase the amount was required. If a loss was incurred you would obviously have to provide back up paperwork for the purchase.
And as Michael said, dealer insurance is a lot more expensive than a rider to your homeowner's policy. If memory serves I think I paid over $200 for 10 or 12 thousand dollars of insurance. Keep in mind that riders to your homeowners policy will probably require proof of value and ownership if you file a claim.
Even if you are not a "dealer" you should be keeping records of your purchases if you plan on selling your collection some day and it has a substantial value. Say you sell your collection at auction for $10,000 - the auction house will issue you a form 1099. A copy of that form goes to the government. They will look for that money to be on your tax form either as a business sale or as a capital gain or loss. If you have no paperwork and it is a capital gain I believe that it is taxed at a higher rate (used to be 28% when the normal rate was 15% - have no clue as to how the regulations may have changed).
A good friend is still paying off his capital gains tax due from many years ago as the result of an unreported Sothebys sale.