Exclusively from Foa & Son
Summer is over and most folks are back to their routines; it’s a good time to take a look at an insurance topic we only occasionally touch on. Our Insurance Newsletter mostly focuses on commercial property and liability insurance subjects, in an effort to offer our clients useful information and insight into these necessary products. From time to time we make small forays into personal risk and insurance topics, but it’s worth paying some attention to that subject here.
Readers of this Newsletter are typically owners, principals, CEO’s, CFO’s or other high ranking executives or owners of commercial or public enterprises. Such folks have typically enjoyed a certain amount of personal financial success, and while they might not necessarily think of themselves as wealthy, with some success in life most have accumulated substantial personal assets. Many also engage in a variety of leisure time pursuits, hobbies or pastimes that also create personal risk and exposures that fall outside the four corners of standard personal insurance policies.
As a result their personal insurance needs can often be as complex as those of many smaller businesses and corporations. There are a number of fairly common problems we frequently find in personal insurance programs. Here is a look at some common ones; see if any might apply to you:
1. No personal umbrella policy. Most of our readers likely carry more than just the minimum required limits of liability insurance, particularly on their auto policies, but without an umbrella you still don’t have enough insurance protection.
We offered several real life examples in our Winter 2010 edition of the Newsletter of common occurrences faced by normal folks that led to outsized jury verdicts against them and ensuing catastrophic consequences to their personal finances. Multi-million dollar awards in personal lines liability suits are no longer uncommon. If you cause a serious accident and have assets, you can be sure the injured parties will come after you for compensation; personal umbrella policies are a cheap way to protect those assets. They should be written to cover over all underlying liability policies.
2. Inadequate uninsured/underinsured motorists limits. Recent insurance industry research showed that in the five states with the highest percentage of uninsured drivers, a quarter (that’s right, 25%) of all drivers on the road were not insured. These aren’t just smaller or less populous states; California was one of them. The five states with the fewest uninsured motorists still averaged six percent uninsured, one of every sixteen cars on the road.
Not insured means no insurance, but not included in these statistics are drivers who might only carry low or even just minimum mandatory limits of insurance as required by each state. Required per person limits range from a high of only $50,000 (in just two states), to as little as $10,000 (three states) or $15,000 (nine). Most are in the $20-25,000 range. These are pretty scary numbers. A Florida driver would count as properly insured with just a $10,000 bodily injury minimum limit even though that entire amount could be used up in the first hours of medical care after an accident.
Since you can’t rely on other drivers to be properly insured, you need to protect yourself and your loved ones with high uninsured/underinsured motorists limits on your auto policy.
3. Homes and dwellings are often substantially underinsured. A common misconception in personal insurance is confusing market value with insurable replacement value. When your home burns down you want to replace it, and all you own inside it, right now. You’ll be paying full retail for everything. You need to make sure you have enough insurance to do that.
4. Home policies also have lots of sublimits on special types of property. Cash, negotiable instruments and jewelry all have very small internal policy sublimits. Stamp, coin, gun or other collections are limited or completely uninsured. Art, paintings, fine arts? Not properly covered. Do you or your spouse operate a small business or profitable craft or hobby from your home? Uninsured. Own a separate vacation or other rental property? Problems there, too. These things all need separate, detailed attention.
5. Speaking of hobbies, do you own an antique or collectible auto or other vehicle? A motorcycle, RV, off road or other vehicle? Numerous articles have been written in the insurance trade press about insurance coverage issues caused by golf carts. How about boats or personal watercraft? Once you venture into maritime law and liability you are in another world entirely.
6. The second biggest cause of personal property loss over the past decade in the U.S. has been floods. It’s hard to believe anyone does not know this by now, but its worth repeating that your homeowner or dwelling policy does not cover flood loss. The National Oceanic and Atmospheric Administration (NOAA) reports that almost half of the U.S. population lives in coastal counties; add in the population that lives in flood exposed inland areas and most people face at lease some risk of flood loss.
7. Last point: building codes and zoning laws have been changing as public officials have learned hard lessons from past natural catastrophes and become aware of potential issues from climate change. Unless you live in a brand new home, chances are good you would not be able to rebuild it exactly as it is without significant (and costly) upgrades. These are not covered by standard policies unless the policy has been specifically endorsed to do so. Most have not.
Given all this, and the simple fact that people’s circumstance change over time and the last thing most folks think of is to notify their insurance agent, it’s easy to see why it is not uncommon to often find poorly written personal insurance programs. The only thing that saves most people in general from being severely impacted by an inadequate personal insurance program is that 99% of the time…..Nothing Happens. And when Something Does Happen, it’s, fortunately, usually not catastrophic.
Still, relying on Nothing Happening as a personal financial and risk management strategy does have drawbacks. If you have not spent some time and thought on updating your personal insurance program recently, think about doing that now, and give us a call.