By Tony Delane, CFP®, AIF®, Associate Wealth Advisor
When it comes to protecting your wealth, property and liability insurance coverages are an important yet often overlooked area of focus. These insurance products cover the most valuable items in your life, such as your home, car, and other expensive belongings, against perils that are often out of your hands. Perils such as theft, fire, and accidents can be very costly to cover out of pocket. And personal liabilities can put your financial assets at risk. It’s imperative that your insurance policies are sufficient for your needs.
The full scope of property and liability insurance required can be complex and overwhelming. It’s a critical part of our risk management approach to review your policies with you on a regular basis.
While there is a long list of key protections and costs we scrutinize, here are the top three areas we review:
1. The Property and Liability Insurance Premiums You Pay
This is the amount you pay for your property and liability insurance coverages. It’s usually billed monthly or annually. The cost of your insurance can vary depending on what’s being covered and how extensive that coverage is. The actuaries who determine coverage costs include factors such as where you live and your past claim history. Insurance companies often have discounts for “bundling,” or placing multiple policies with them.
Typically, the only way to reduce your premium is to shop around and get quotes from other companies, or to reduce your coverage. It’s a fine balance to minimize expense without sacrificing the quality and coverage of insurance you need. Carrier selection can play a role here as certain policies will be more expensive if placed with a company that has a reputation for fiscal stability, responsive claims processing, and hands-on customer service. We would much rather our clients be “over-insured” and pay a little extra for their coverage, rather than the alternative, which could have catastrophic consequences.
2. The Liability Insurance Coverages You Need to Have
You’re likely aware of line items on your home and auto policies that treat liabilities. These are coverages that pay for damage or injury you cause to others, whether directly or indirectly (This typically wouldn’t apply to deliberate or criminal acts). The two most common examples we hear about are car accidents where you run into somebody else, and at home, if a person slips and injures themselves. Most states require a certain level of coverage by default, though those minimums are often way too low to be sufficient.
In fact, even the typical recommended amount of liability coverage on a home or auto policy –somewhere around $250k to $500k – is frequently too low given the risks out there. For this reason, we are diligent in making sure our clients have a type of policy in place known as Umbrella Insurance, sometimes known as Excess Liability. As the name suggests, this is an insurance policy that sits above your other coverages to give you more liability protection. These policies typically start at $1,000,000 of coverage, and go up from there. Although that’s a big number, the coverage is relatively inexpensive and is usually a few hundred dollars per year to start.
In the case of a lawsuit or claim in excess of your regular coverage, this would kick in to cover those situations. We have seen clients utilize their umbrella insurance, so we know how important it is. There are many critical topics we cover in our approach to holistic financial planning – this is one of the highest-priority items to get right.
3. Uninsured/Underinsured Motorist Coverage You Should Be Carrying
In March 2021, the Insurance Research Council determined that one in eight drivers on the road was driving without insurance. Ever wonder what happens if you get into an accident with someone who is at fault and has the bare minimum insurance – or worse, none at all? Here’s your answer: Uninsured/Underinsured Motorist coverage will show up on your auto policy, and would kick in under those circumstances.
State minimums are often way too low. We typically recommend you match your coverage to the Bodily Injury and Property Damage limits on the policy. In addition to protecting you from an issue with somebody with insufficient insurance, it would also kick in for a hit-and-run type situation, which is sadly all too common.
Collaborating With Your Property and Liability Insurance Agent – And You
These are just some of the aspects we evaluate when reviewing your insurance policies. We can help recommend changes to the coverage amounts and point out possible deficiencies in your coverages. We frequently collaborate with clients’ insurance agents, and if you’re working with one, are happy to do so with yours.
As part of the review, we’ll create a summary that puts all of the information into a few short pages. And if we don’t recommend any changes, it can be handy to have this information all in one place for reference. We look forward to looking at your insurances with you!
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant.