Letter Re: It Matters Not Whether We Face Inflation or Deflation–You Need to Protect Yourself


That was an excellent post by Gentleman Jim! His view of insurance is right on and should be reinforced. I’ve come to realize that the best way to conceptualize prepping is in terms of insurance. As Jim stated, just like every family needs home insurance, auto insurance, medical insurance, etc., you must also have survival insurance. In fact, this should be the most important insurance you carry. If you have a family, you owe it to your spouse and your children to ensure that they will be safe no matter what life throws at you.

There are several good reasons to use an insurance perspective. The financial obligation is easier to digest once you consider all your insurance premiums together. For example, the cost of my health, auto, and home insurance combined (family of 4, 2 vehicles, 1 house) is now running about $12,500 per year (and this keeps going up, ugh!). So, a conservative estimate of the value of survival insurance could justify spending at least a quarter of this amount ($3,125/yr.). If you think survival insurance is more important than the others (and I do, at this point in time), then consider a survival insurance premium worth 50% of your current insurance ($6,250/yr). From an insurance perspective, I hardly bat an eye over spending several thousand dollars on supplies. While my numbers don’t apply to everyone, the point is the same: look at your current insurance costs; figure a percentage that your think is fair; consider it a premium like other insurance; and work it into your budget. You simply cannot afford to not have survival insurance!

Another benefit of an insurance perspective is that helps you conceptualize the extent of your coverage. In other words, how much coverage do you have now and how much do you need/want? Take the worst case situation that all the stores are closed a/o out of supplies, and ask yourself how long you could be self-reliant? Do you want insurance coverage for 3 months? 6 months? >1 year? Each time period carries a different premium. Also keep in mind that unless you are self-sufficient, after your insurance runs out, you are a refugee. I agree with everyone who advocates having at least a 1 year policy. This timeframe is based on the minimum it would take for a disruption of the food supply to return to normal. At whatever point a disruption occurs, there will need to be at most a year of seasons to regain farming and agriculture (that’s assuming there is a quick resolution to whatever caused the disruption). Of course, as everyone is are aware, there are worse scenarios that could disrupt supplies for a longer period (possibly indefinitely). If you’re worried about that, then you need to take out a larger insurance policy that includes ways to secure your own resources and food.

I would also like to point-out a purely semantic benefit to calling your preparedness activities “insurance.” How many of you have had a spouse/sibling/friend question your sanity as you’re pouring 50 lb sacks of red winter wheat into storage buckets? At some point, after one too many boxes of freeze-dried fruit, toilet paper and ammunition enter the house, someone’s going to raise an eyebrow. I hope your acquaintances are more intelligent and mature than mine, but if they’re not, explain it in terms of insurance. There is a quarterly insurance premium for our safety and peace of mind, and we are not losing grip on reality. I understand the fragileness of society and recognize my duty to provide insurance for the family. I can usually turn the insanity perception around and point out to folks that they must be insane not to have survival insurance.

I also like the way Jim describes gold & silver as insurance. Owning gold and silver is an important part of your survival insurance policy. While I think that being self-sufficient is more valuable than money, for those of us who are not totally self-sufficient, we will need an alternate and liquid form of money. In my opinion, gold and silver American Eagles are the best insurance against the collapse of fiats because: a) they are currently the most liquid form of bullion; b) their content is guaranteed by the mint (no assay required); c) divisibility; and d) they are currently a form of legal tender. In case some readers are not aware, bullion US Mint American Eagles are legal tender, while bars and foreign coins are not. While there is commodity value in owning bars and foreign coins, as long as there is a Treasury Department, they cannot officially be used as money. Here is a link to the US code section that defines money.

On the subject of legal tender [status], it should be pointed-out that bullion American Eagles have a value equal to the amount that is stamped on the coin. For a one-ounce Gold Eagle, this equates to a $50 value in terms of money. The gold commodity is currently valued around $950/oz. If you’re considering purchasing bullion, try not to let this price dissuade you. View it like a currency exchange similar to exchanging dollars for pesos. When you exchange for a foreign currency, you don’t balk at the exchange rate. It is what it is. In terms of bullion, if you understand that the reason you’re exchanging dollars for bullion is because you believe that the fiat will ultimately lose its value, then you are simply exchanging paper for a commodity at the going exchange rate. You can help offset the rising rates by making one cash-for-bullion exchange per year. Also, if you took at look at that Weimar Hyperinflation Timeline someone recently posted, you would know just how fast cash can lose its value. $950 today might be much, much more in a hyperinflated future. Make sure your savings don’t get completely wiped-out by hyperinflation. Exchange some of your cash for bullion and insure yourself against this! [JWR Adds: By the way, the established Legal Tender status of American Eagle gold and a silver coins opens up some interesting tax implications.]

I totally agree with the opinions for owning pre-1965 coins. They are legal tender and are the lowest denominated bullion. But I would also like to point out that in terms of divisibility, gold eagles can be purchased in denominations of 1oz, 1/2oz, 1/4oz, and 1/10oz. The 1/10th oz coins have a $5 face value and a commodity value of about $95. They are smaller than a dime (so are light and easy to carry), and would be the most suitable gold coin to use for small purchases in a post-SHTF economy. Keep the larger coins squirreled away (outside the banking system) as a store of value.

If you’re looking for a storage solution besides your backyard or home safe, there is a unique security company in Idaho called Idaho Armored Vaults that stores and segregates your bullion outside of the financial system. I have no interests with this company, but am acquainted with the owner. He is extremely knowledgeable about all things bullion.

One last point along the lines of insurance: this type of policy should be perpetual. If I am lucky enough to get through life without ever using my survival insurance (apart from eating the food and using the household products), I intend to will it to my kids. It is very gratifying to know that after I’m gone they will have bullion, firearms and other tangibles to help insure their futures. (If you like the idea of inheritance, be sure to consider creating a family trust. Keep all the possessions in the trust for protection from sour relationships). If you approach this as a perpetual insurance policy, you could be setting the foundation to ensure the safety of many generations in your family. Just think of how much this policy would be worth today if your grandparents had started it!

God Bless and Good Luck. – Chris G.