Understanding the Importance of Insurance
It’s not uncommon to hear financial planners discuss the need for life insurance, disability insurance or long-term care. It is less common to hear them discuss homeowner’s insurance, auto insurance, fraud protection, or umbrella policies. The risk associated with being under insured in the latter category can be just as damaging to financial wellness as the lack of insurance in the prior. Being underinsured for your home, auto, or liabilities is mostly due to a lack of understanding or a failure to review and update current policies.
Let’s start with umbrella policies. If you have a dog or children, it is recommended to have an umbrella policy. These policies are typically added to your homeowner or auto coverage and provide 1 million to 5 million dollars in liability coverage. The cost of coverage varies but is typically a few hundred dollars a year. The policy will protect you and your family from most liabilities that aren’t covered under your traditional policies. For example, an individual in our office used their umbrella policy when his dog went after the neighbor’s cat and caused some harm (both animals are fine and living their best lives still). There was no deductible due and the insurance covered all vet bills and expenses to the neighbor. This is on a small scale, think of the damage that an inexperienced driver could cause and the liabilities that would follow. For a seemingly nominal cost these policies provide a great deal of protection.
When was the last time you reviewed your homeowner’s policy? Has your home increased in value since that time? Have you made improvements, renovations, or additions that added value to your home? Did you increase your coverage to protect the new value of your property? What about the valuables in your home? Does your policy have an endorsement for expensive jewelry, that road/triathlon bike that cost as much as a car, prized sports memorabilia, those priceless books, the gun collection, or any other unique and valuable items you may have in your home? It’s recommended to review your coverage with your agent annually and especially before or shortly after any major projects or purchases. If you have insufficient coverage at the time of a loss, there is little to nothing that can be done to undo the costly loss.
Identity theft and cyber crime is one of the fasting growing crimes in the world. There are many solutions to protect against these types of losses. Certain credit cards provide a free, ongoing credit report or credit score. This is a good start but in the situation of a loss is there any recourse to recover losses? There is a difference between identity theft insurance and identity theft protection plans. Identity theft insurance will reimburse costs associated with regaining and undoing the identity theft. This does not typically include reimbursement for the money that was stolen or used fraudulently. Identity theft protection plans monitor your credit activity and bank accounts to identify identity theft before it happens. These plans are typically provided through a third party or one of the credit reporting agencies. Additionally, a few insurance companies are offering personal cyber security insurance. This is insurance that protects in cases of cyber extorsion or cyber attack damage.
It is important to understand your insurances and regularly review your coverage. Everyone will have different needs and risk exposure. Work with a trusted property and casualty insurance agent. Discuss unique situations to your family and your belongings. Make an educated decision on which coverage is best suited for your needs.