What is the role of insurance in safeguarding pledged gold during the loan tenure?

Once you take a gold loan, the jewellery stays with the lender until repayment. Since it's no longer in your possession, robust security measures are put in place to protect the gold against risks like theft, fire or damage.

Lenders usually rely on strong vaults with restricted access, CCTV surveillance at storage and movement points, dual custody, sealed packets and regular internal checks. These focus on the gold articles' assessed weight and purity while in custody. However, some lenders may also protect the pledged gold with insurance, though the terms and conditions of such insurance largely depend on the financial institution’s internal policies.

Also, protection applies only during the lender's custody and covers physical security, not gold price fluctuations. It ends at loan closure when jewellery is returned.

Lenders handle any issues through internal processes without requiring separate borrower arrangements. Physical controls like access restrictions and documentation provide the main daily defence. Before pledging, ask about storage practices, verification routines, and handling procedures for full clarity.