After spending the last 40 years in the insurance industry, I continually remain surprised by the lack of general planning and the missed coordination of insurance policies and coverages by individuals at almost every economic level.
I believe agents and brokers have a professional duty to constantly recommend annual planning to their clients. By providing our own clients with examples of unforeseen events that we have witnessed throughout our careers, we set the stage for a call to action, if ever one is needed.
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Overall, planning requires a thorough process, encompassing due diligence and access to a trusted advisor who thinks of the client as a close personal friend or family member.
In contrast, most insurance carrier advertising focuses on price, discounts and savings, to appeal to the consumer on a commodity basis. Some national carriers have even changed their message, to claim events and claim outcomes. But, we believe that for an agent/broker, claim coverage offered through a properly written insurance policy is the gold standard, and all other measurements should take second place.
In this context, I suggest that an advisor review all your policies to determine if a singular carrier can provide necessary coverage. This objective sets in motion a comprehensive review of your risk exposures, not just the newly purchased second home, or the new car on your wish list.
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When discussing risks and exposures, you need to communicate each owned or rented property, vacant parcel, automobile, boat and other shared property or vehicle agreements that may create an exposure. The advisor should then ask questions as exposures emerge, to create a full picture and the beginning of an actual plan.
That way, as a risk is clarified and all exposures quoted, the opportunity for a favorable negotiation to reduce the premium becomes meaningful. Carriers refer to this as “special terms and conditions.”
The clear number-one deficiency in insurance coverage is inadequate liability insur- ance. Before you and your advisor select a limit, see if all your policies and exposures (homes, cars, boats, rentals) are listed in your master policy.
Most people simply don’t anticipate a large-liability, worst-case scenario.
Oftentimes during a review, we recognize missed exposures because every change to a policy, purchase or sale of an exposure must be endorsed to the master liability policy. Our average number of policy changes for clients with multiple cars and homes in multiple states is 15 per year.
In fact, inadequate amounts of liability insurance represent a potential life-changing event for an individual or family. Fully 21 percent of the insured population lacks a personal umbrella; and 40 percent has less than $5 million of coverage. Most people simply don’t anticipate a large-liability, worst-case scenario.
That can be serious: Two years ago, at our agency, we experienced a claim which resulted in a $13 million automobile liability judgment. The son of a client had borrowed the family car and severely injured a husband and wife who were out on a Sunday drive. So, be aware: Courts can order liquidation of assets, savings accounts, investments and real estate holdings, especially vacation homes and rental properties.
Liability coverage in the form of a personal umbrella policy should be written at a level that protects your assets. Properties, vehicles, bank accounts, investments, etc. should be valued for coverage. A personal policy with higher limits can be negotiated and layered by different carriers to reduce your premium.
In conclusion, annual insurance planning is worth your time and effort. Be sure to work with a trusted advisor to determine if a singular carrier can provide all necessary coverage. Focus on liability coverage and adequate limits with a worst-case scenario in mind. This strategy will keep your important assets protected.
This article was originally published in the August/September 2016 issue of Worth.
