To Review or Not To Review?

I've been asked so many times over the last couple months, "When do I know I need an insurance review?"

If you're asking the question, the answer is probably "NOW!"

I thought I'd put together a quick list of life events that would cause exposure to change, which should then trigger you to consider having your coverages reviewed.

• Purchasing a new car: Whether it's your first or your 100th, you need to make sure coverage is appropriate.
• Moving: Buying a house? Renting an apartment?  Doesn't matter - check your coverage.  Different locations mean different exposures.
• New Bling: If you're getting engaged or celebrating a milestone anniversary, it's time to have your coverage checked.
• Getting Married: Between receptions and consolidating assets, it's a good time to make sure everything's in line.
• Getting Un-Married: Let's face it, with the divorce rate as it is in the US right now, there's a chance this happens, so let's make sure everyone is properly covered as we go through the process.
• Kiddos: Whether they're learning to drive, heading to college, setting up a Facebook; kids are more exposure than we can ever imagine.
• Liquidation Event: With cash on hand, lawsuits are looking for deep pockets.
• Retirement: A good time to make sure you haven't lost any coverages at work that were part of your property and casualty program.
• Estate Planning: New Trusts & LLC to preserve your wealth for the next generation?  Your insurance policies MUST show these to have proper coverage.
• Home Renovations: Before, during and after - what should you know from an insurance perspective?

While this list is not all inclusive, I hope it gives a good grasp on when to call your broker for a review; NOW.

Let me know your thoughts.  What should be added?

Incorrect replacement cost can cost you!

More often than not I get clients coming to me saying their agent is over insuring their home.

                “The dwelling value is $X over what I paid for the home!”

                “I could never sell the home for that amount!”

                “If I had to rebuild this home, I could easily do it for $X amount.  You wouldn’t have to purchase the land again…”

All very valid statements and reasonable arguments, but what they don’t know is that there’s more to the story.  Rebuilding a home is not the same as buying an existing home, nor is the same as building a home from ground up.

Because of the common misconception, here is a list of things that come into play with rebuilding a home after a total (or partial loss):

·         Cost of labor: Cost of labor is constantly increasing and an ever changing market.  Depending on the reason the home was a total loss, there might be a shortage of labor (as there would be following a hurricane, tornado or earthquake) or there might be no issues with labor (as if there was a single home fire).

·         Demolition and debris removal costs: People forget that after a total loss, there typically are parts of the home that are still standing.  These portions have to be torn down and removed.  Debris removal and demolition costs can be costly.

·         Cost of materials: Most insurance companies look to make you whole, some look to put you back EXACTLY as you were before.  What’s the difference?  If you had marble flown in from Italy in your kitchen, some companies will replace it with regular marble, some will have marble flown in from Italy.  The cost of these materials can be very different and some of these markets fluctuate much more often than others.

·         Building permits: If you’re building a home (even if it’s rebuilding) you need to apply for building permits.  This takes time, effort and money.

·         Architectural drawings: Again, another thing that is necessary to rebuild a home.  These also cost a pretty penny and take time.

So, no, maybe you cannot sell your home for what it would cost to rebuild it and no, you do not have to purchase the land that your home was already sitting on, but there are a lot of other factors that come into play with replacement cost that may not matter in other situations.

Photo courtesy of:

http://www.genins.com/img/~www.genins.com/istock_000004049945small.jpg

Avoid the Rain, Buy an Umbrella

There are many websites online that show the US as having the highest amount of lawyers per capita and some showing that the US is in second place internationally.  Regardless of what statistic is completely accurate, I think it’s safe to say the US has a ton lawyers.  With a ton of lawyers comes a ton of law suits.

So, what does this mean for you?  You drive safely, have a fence around your pool, always supervise children on your trampoline, are careful about who operates your watercraft and even only let close family or friends go to your second home.  But with all this “stuff” and all these “activities” comes exposure, and a lot of it.

We always recommend our clients have personal liability coverage, regardless of who they are, what they have and how old they are.  We are still all at risk.  Because a bulk of the coverage comes through a policy called an umbrella policy or excess liability policy, I’d like to share with you some options that these policies may offer you.

·         Defense costs: Some insurance contracts say that the defense costs are part of the limit you choose and some pay the costs outside of the limit.  So what’s better?  If you have the choice, always chose outside of the limit.  This leaves the $1M, $5M, $10M, etc. limit you choose to pay for damages to the other party or a settlement and the $100K or more of legal fees you incurred are paid completely separate.

·         Available Limits:  There is a myth in the marketplace that individuals cannot obtain limits above $5M.  This is not true.  There are many carriers who offer limits well above $5M and some all the way up to $100M.  Clearly everyone doesn’t need this high of limits, but I say with confidence that all people should have an umbrella or excess liability limit of some sort.

·         Employment Practices Liability (EPLI): Sometimes individuals and families have people who work for them directly.  Now, to be clear, I am not speaking about having a cleaning company come to your home or a landscape company; I am talking about John Doe coming to your home to clean regularly and when you pay John, the check reads his name or the cash is handed to him.  If this is true for you, you might want to see if you can obtain EPLI coverage on your umbrella policy.  Some companies offer this coverage as an endorsement for a certain number of employees.  What this pays for is defense costs and settlements for employment related matters.  The best example I can share is imagine you hire an individual to clean your home.  This individual has family overseas and notices you have a home phone.  The individual decides to call her family overseas one day for just a couple minutes.  This quickly becomes a routine thing and you notice that your phone bill has skyrocketed.  You promptly terminate the individual.  The individual comes back complaining that you fired her because she was foreign.  This coverage would protect you from a suit that individual may place against you.

·         Non-for-Profit Directors & Officers Coverage:  You’re trying to do some good for the world.  You want to volunteer your time on a board.  Did you know there’s exposure that goes along with this?  The most common response I hear is “Well the board has $1M of coverage for us.”  Well, how many board members are there?  Because this limit is split between all the members and as soon as the limit is exhausted, anything else may be up to you and the other board members personally.  This coverage can be added to some excess liability policies for certain types of non-for-profit boards.

·         Excess uninsured/underinsured motorists: Okay so you’ve done a great job choosing your limit to protect your assets, but why should you trust that everyone else has enough coverage or assets to pay for your medical bills if they hit you?  Answer?  You shouldn’t.  This coverage is available on some umbrella policies up to $10M and is available to cover you and anyone in your vehicle if you’re hit by an uninsured or underinsured driver.  The coverage (just like other coverags on an umbrella policy) sits above your auto policy, the uninsured/underinsured motorist portion specifically.

·         Third Party Liability: This is very similar coverage to the excess uninsured/underinsured motorist coverage, but is an entirely different coverage.  Let’s say you are at a friend’s house for a pool party.  Someone dropped some queso on the pool deck and you’re quickly trying to make your way to get the last mini corndog.  You slip on the queso and fall straight into the pool hitting your head on the way down.  I can almost guarantee you will end up with some medical bills, a hospital visit, potentially some lost time at work, if not more.  If that friend only has $100,000 in homeowners liability, they may not have enough to pay for your medical bills.  That’s where this coverage comes in.  It will pick up (first dollar paid out if necessary) you medical bills, lost wages, etc.  What won’t this pay for?  The corndog you never got to eat, but I’m sure that’s the least of your worries.

The next logical question is how do I choose what limit is right?  Which of these coverages I really need?  That first question is another topic to come.  Stay tuned.

Photo courtesy of:

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfB7U5j8IUYUe05y2VnuheaHBkzXXfQhpofl_TO0h96oGoBmWb7DZxB8X_S6dHFkIJGZMD0SuADU6Z7bRTNLsyEB_qQCcn0QSIKzUW9SjH-u-y_JniGV5Wl3Rs9iLH6__7UbTYkhI-Ttg/s1600/rain+fall+time+umbrella+Desktop+pc+wallpapers.jpg

Commute to Work? Not Enough Sleep? Join the Club.

 

Fall is finally here in Chicago.  The wind has picked up and the weather has cooled down.  My yard is full of leaves, which means it’s time to start doing more yard work.  With more work comes less sleep and I am certainly a victim of this vicious cycle these days.

While I am fortunate to not have to commute by car to work, according to a survey completed Statistics Brain published on 7/1/15, 75.7% of commuters in the US commute alone by car.  According to a December 2013 study completed by Gallup, the average American gets 6.8 hours of sleep.  This is far less than the recommended eight to nine hours of sleep.  Okay, so what?

Less sleep and more driving is a dangerous combination.  If you have a naturally curious mind and do not watch MythBusters, I highly recommend it.  MythBusters confirmed the fact that driving while drowsy is more dangerous than driving while drunk.  While I would not recommend either of them, how can we avoid driving tired?  (Yes, I admit that these things can be hard to commit to, but I wouldn’t recommend risking your life by not trying to take advantage of some of them.  Info courtesy of AAA.)

·         If you’re tired, pull over.  I am guilty of not doing this and it is dangerous.  The one time that this happened to me that I can point out, I arrived home and was terrified of all the things that could have gone wrong.  It all could have been avoided by taking a break at a gas station and walking around.  My life and the other lives in my car are not worth the ten minutes that it could take to get out.

·         Get enough sleep (DUH!).  During the week, this is hard.  I understand!  But no project, proposal, email is worth your life.  I promise.

·         Carpool.  Here’s an easy fix and you’ll save some money!  Carpool with a friend/coworker.  You’ll have someone to talk to and they can watch for your signs of fatigue.

·         Take a power nap.  This one might be my favorite.  Ever since I was young, I was a napper.  My parents can attest to the fact that I slept well and often!  If you’re getting ready to drive home and you’re beat from the day, take a quick power nap.  Most offices have wellness rooms these days where you can catch a quick couple minutes of sleep.

·         Know your signs of fatigue.  Make sure you’re aware of when you’re tired and (most importantly) react to it.  If you’re yawning, if you’re day dreaming, if you’re drifting from your lane.  Know what they are and know what to do.

How can you make the road safer for the other individuals who drive each day?  You would want people to do this for you, why shouldn’t you do it for them?

Info courtesy of:

http://www.statisticbrain.com/commute-statistics/

http://www.gallup.com/poll/166553/less-recommended-amount-sleep.aspx

http://www.discovery.com/tv-shows/mythbusters/about-this-show/tired-vs-drunk-driving/

http://exchange.aaa.com/wp-content/uploads/2012/10/AAA-FTS-Drowsy-Driving-Brochure.pdf

Photo courtesy of:

http://www.geek.com/news/new-seat-belts-know-when-you-are-driving-tired-1600450/

Our New Home (Insurance Policy)

 

My husband and I recently purchased our first home!  It’s an adorable little home (see above!) in the comfort of a suburb of Chicago and we were beyond excited to move in!  But as any homeowner knows, there are a million things to do before you move in to that new home.  Obviously, being a good “insurance nerd”, after the loan was approved and all the paperwork was transferred, my first reaction was, “We need good insurance.”  But what does that mean?  Ask 100 people to define “good insurance” and you will get almost 100 different answers.

Here are some of the things I considered when choosing insurance:

·         Agent/Broker: This is probably the most important decision when it comes to insurance.  This person is representing you to the insurance company.  If you have a less than great agent or broker, the insurance company may question things more often, may receive claims that likely should not have been turned in because they are under your deductible, and not to mention you may not get the service you expect or deserve year after year.  Don’t discount how important this decision is.

·         Replacement Cost:  Replacement cost IS different than market value.  This is one of the hardest things for individuals I speak with to comprehend.  Sometimes replacement cost is more and sometimes it is less than market value.  I have seen both situations, but more often than not, it is more.  Make sure your agent or broker is utilizing some sort of tool to help them put together this number.  Some insurance companies will come out to your home to do an appraisal, which will confirm that the number you are placing on the policy is the most accurate. 

·         Insurance Contract: Make sure your insurance contract is the broadest you have.  Some companies offer earthquake, flood, back up of sump and sewer, etc. all right on the homeowners policy.  Consider the risks you have in your area and look to protect those.  And, if you’re new to the area, why not ask your broker or agent what they see and what their clients are concerned about?  Also, make sure you have at least replacement cost coverage!  (See my post “Valuation Battle: ACV vs. RC vs. ERC” from 12/30/13 for more details.)

·         Pricing: Price is always a consideration when choosing coverage.  While looking for coverage, remember that every insurance company has a different target market.  Some companies want homes over $1M in replacement cost, some companies are looking for clients with no claims, some companies only want homes with alarms that are monitored.  Brokers typically have access to more than one company and can help you make a decision about which carriers are best, so this is likely an easy way to explore the market.

·         Company: There is something to be said about branding and customer experience of insurance companies.  You want to be sure that if there is a claim, your insurance company is going to work with you to get your claim resolved, not against you.

·         Ownership of the Home: Did you title your home in a trust or an LLC?  It’s EXTREMELY important to make sure that your company adds this entity as an additional insured.  This provides liability coverage for this entity should it be sued in the event of a liability claim.  Not all companies can do this, so make sure to check while going through the placement process.

There are so many other things to consider, but these are what I found to be most important.   Happy home hunting!

A Diamond is a Girl's Best Friend

 

There aren’t many people I know who don’t like getting something new and shiny – especially if it’s a beautiful tennis bracelet or a great pair of diamond earrings.  As the saying goes, “A diamond is a girl’s best friend.”

Over the past three weeks I have run into multiple individuals who are concerned about their jewelry collections and potential losses associated with these items.  What are some of the (warranted) concerns I am seeing?

-          Chipped or missing stones

-          Mysterious disappearance of an item

-          One lost item of a pair or set

-          Theft

So – what is the best way to avoid or deal with these losses before they happen?

-          Have your items regularly checked by a jeweler (One recent client caught a horrible loss because the jeweler checked this item every six months.  If they had not done this, it would have likely been years before they were able to recover the damages.)

-          Get an in home safe that is bolted down (I can’t tell you how many horror stories I have heard where the individual has a safe but it’s not bolted.  The thief takes the entire safe and the whole collection is gone.)

-          Make sure your insurance policy includes pair and set coverage (This is especially important for earrings.  If one earring is lost or stolen, you want to be sure you can replace both of them so they match exactly.  This endorsement allows you to do that.)

-          Bring only enough jewelry for you to wear if you’re traveling (There are some cases where you may need special items, but at the risk of having them stolen or left behind, it’s always better to only bring what you will wear to and from the airport.  There are numerous real life examples of individuals having their bags checked by security and items fall out, or are never placed back in the bag by TSA.  Don’t allow this to happen to you.)

-          Have updated appraisals completed every five years or so (With the value of precious metals and stones going up almost every day, an item can easily appreciate in the course of a year.  While there are some policies that build in coverage for this so you can replace the item, many policies only place a stated value coverage which does not allow any increased coverage for appreciation.  These appraisals will give piece of mind that you have the correct number assigned to this item and many times the jeweler you bought the item from will update your appraisals without any cost to you. )

While insurance policies are great things, some of these things are steps you can take to protect yourself.  What other ways are you managing your risk?

 

Photo courtesy of: http://www.adweek.com/fishbowldc/files/2010/11/diamonds-1.jpg?red=dc

Inside Job

Would you let someone into your home with permission to dig through your things without your direct supervision? People do it all the time with new housekeepers, construction workers, painters, etc. These people are usually recommended by friends or "reputable" companies, but the risk of theft still arises. 

Recently I've dealt with two situations. The first where someone was having some renovations completed and two of his jewelry items were stolen by the workers totaling about $22,000 (luckily one of the items was recovered). The second where this lady was very busy and was in desperate need of having her home cleaned before a large party. She didn't have time to supervise the cleaning lady she hired. A couple months later she realizes a significant amount of her jewelry is missing. 

You're probably thinking "But I'm smarter than that, I hire trustworthy people." Or better yet, "I'm home when they're working. What do I have to worry about?"

The truth of the matter is we have to depend on other people to help, but it's hard to be sure we can trust them. 

So how should you protect yourself? 

1) Hire from a recommended and backed service who does background checks on all their employees. 

2) Use referrals from close friends. 

3) Protect yourself with valuable articles coverage for your more expensive items that might be at home outside of your supervision. 

4) If you hire someone that is paid directly by you (an individual that does not work for a contract company or a cleaning company) make sure to do your research and reach out to your agent to see if you have employment practices liability coverage for domestics available to you. 

5) Always keep your valuables out of sight. 

6) Periodically spot check the work of the people coming to your home. 

Have you been victimized? What do you do to protect yourself? I want to hear from you!