Taking on The Risk of Loss
No one likes paying for insurance. Wouldn’t paying for it be even worse if you find your coverage is inadequate?
Car insurance, home insurance, renters insurance, umbrella liability insurance. It seems like we pay and pay – and of course we really do not want to be in the position to have to collect – because that means something awful has happened.
Why do you have this kind of insurance, anyway? Your mortgage company requires fire insurance, you are required to have auto insurance by the state. Would you have it if it wasn’t required? Some people don’t have it even though it IS required. If you have accumulated any assets at all – or hope to – having adequate protections from lawsuits is the major reason for property casualty insurances.
How can you know if you are adequately protected?
You can begin by finding your auto, homeowners and umbrella liability policies. The next step is to read them. I know it’s hard, but somebody has to do it. Your insurance agent or financial planner could do it for you. Sit down with the policies and a highlighter and highlight anything that sounds strange to you. Do a little research on the web – or email us for some basic info about coverages. Then schedule a meeting with your PC insurance agent. Let them explain the coverages you have and what areas are not covered. After all, they receive a commission every year for the payments you make. If you work with one of those 800# companies, call them and ask them about policy exclusions. Make sure you get the full name and location of the person you speak to.
There is so much we need to know and so little time to fit it all in.
I am sometimes amazed at the sorry mess our finances can be in. It’s not that we don’t try hard to get it right – there often is not enough time – or we are barraged by media ads selling us untruths to make us buy the product. The food industry is great at this – the illness we experience is most often a coagulation of years of eating addictive foods – like sugars, additives and wheat products. Think about it – do you every actually crave green beans? Too much attention to media ads infiltrates our financial thinking, our health thinking, our relationship thinking and on and on. In the health area, for example, I had a grandfather who cured himself of a number of ailments by changing his eating practices. Holistic healing is a part of my family tradition, so I tend to discount the drug ads I see on TV.
Unfortunately, we are raising a society whose health consciousness gravitates toward taking a pill – wanting a magic bullet to cure us instead of doing the harder work of changing bad habits. Many don’t even know they HAVE bad habits. No one is on the tube touting the virtues of vegetables. Many otherwise smart people never see a vegetable cross their plate – unless it’s a potato.
How often we can be hurt by not knowing what we do not know. Ultimately, it is our responsibility – whether it is food we consume or insurance we buy – to try to do the right thing. Study health. Once you lose it you’ll regret it. Schedule time to review all your financial stuff – not all at once – but at least once every year or so. Make a date with your spouse and then go see your agent. After a lawsuit or catastrophe is not when you want to find out your coverage is inadequate to protect you.
At the very least you need to review homeowners, auto and umbrella liability policies and coverages.
If you are sued for a million dollars – how long would it take you to pay that off?
Are you more likely to be sued – and more likely to lose?
Are you among the group considered to be affluent? Income affluent or asset affluent – doesn’t matter which. Your income and assets are at greater risk than those of the average citizen. You have more to lose – including future income.
A study * done in 2002 showed that 80% of high net worth individuals and families who need specialized PC coverage do not have it.
Unique property risks of the affluent:
A recent lawsuit against some doctors I know claimed collusion and several things that meant their malpractice insurance would not cover. An attorney can say just about anything they want to bring a case. If something like this happens your finances could be crippled for life.
What about something as simple as your dog? Did your dog ever bite anyone? Did you get sued? People who are afraid of dogs can claim things like emotional distress and loss of wages and lots of other things for a little nip. If you live in a big house you can expect a lawsuit at some time.
* Insurance Age magazine, March 5, 2002
What level of service – what level of knowledge? Are you getting the most from your PC agent?
Contractors liability insurance – would you let someone work on your house without proof of insurance? Any time someone does construction work or repairs – what happens if they, or someone working for them, get hurt. Could you be sued by the injured party? If the contractor has no insurance you can bet on it. Even if they do have insurance, you need to make sure your coverage limits are adequate to protect your assets. If you sign a contract, make sure the issue of liability is covered – and that employee accidents do not fall to you to settle.
What if the employee is yours? Many people have domestic help. Nannies and housekeepers and gardeners. You may have a rider on your policy for business activities in your home – this is different. There are issues with workers compensation and disability as well as all the tax issues.
Some folk who choose not to use an agent for their insurance to save $150 a year in premiums miss out on having someone on their side in the best coverage for the best price battle. How much is your time worth? Every couple of years I sit down with my agent and review coverages. I’ve had coverages in the past with domestic employees, a swimming pool, office employees – each of these areas require special coverage and special knowledge.
I have two cars, some expensive contents, an umbrella policy, office contents and liability. The agent recently put the whole program together in a package that is cost effective. Cheaper is not always better – after all, would you go to the cheapest brain surgeon? But better insurance is not always more expensive.
Most of us – especially the well off – have a patchwork of insurance acquired over years of acquisitions. We are too busy to take the time to co-ordinate insurance coverages. It costs more and protects poorly.
When’s the last time you did a comprehensive review of your property insurance?
I know. You’re busy. You can’t even find time to schedule your annual physical. Besides, how are you supposed to know about all these things? Well, that’s why you have an insurance agent. If you do, request a review. If you don’t you’re on your own – unless you pay your planner to do a review – that is if your planner understands the ins and outs of PC insurance. They should at least be able to provide you with some basic written information about homeowners and auto insurance. Understanding the ins and outs of these property casualty coverages requires specialized knowledge and experience.
Here are some things that should trigger a review.
13.High visibility lifestyle
14.Do you serve on a board of directors?
Most of us don’t have a clue how exposed we are to the risk of loss or a lawsuit. Call your agent today and schedule a review. Pull out those policies and mark them up with a highlighter. Or call your financial advisor and dump it on them. One way or the other, make sure you have the protection you need.