As a Personal Insurance Consultant, the most important aspect of my role is taking the time to review clients’ coverage at the beginning of our relationship. The team at RogersGray works with our clients to determine if they have any gaps in their personal insurance coverage. While pricing and discounts are important, the actual coverage – or lack thereof – within each personal insurance policy is paramount.
Often when reviewing a new client’s existing policies, I find glaring gaps that leave them exposed to potential financial disaster. Here are a few frightening scenarios I come across more often than I would like:
GAPS IN COVERAGE CAUSED BY MULTIPLE POLICIES WITH DIFFERENT AGENCIES
Recently, I met with a client who had their auto and umbrella policies written by different agents. Unfortunately, the agent who wrote the auto policy failed to ask whether the client had an umbrella policy in place. Because of this lack of consultation, the client’s underlying auto limits did not meet the minimum limits required of the umbrella, leaving a gap in their auto bodily injury coverage of $150,000.
What does that mean? If my client had been at fault in an accident, causing severe injuries to the driver or passengers in the other vehicle, a lawsuit would be likely. Unfortunately, their auto coverage was only going to cover the first $100,000 of the suit, but other expenses like medical care, lost wages, and pain and suffering could add up to a much larger amount that wouldn’t be covered by the umbrella policy.
INCORRECT GARAGING ADDRESS
During a move, there are so many things to take care of, it is common to overlook updating your garaging address on your auto insurance. Even children that seasonally move to college should have their policies updated to reflect their temporary change of address if they bring a vehicle to school with them.
Why is this? Any accidents that occur after the move may be denied because a major factor in coverage is based on the geographic density of other drivers. For instance, if your child goes to college in Boston but your primary home is on Cape Cod or the South Shore, they need to report the Boston address, which unfortunately may result in a higher premium. We have seen insurance companies deny claims due to a vehicle’s garaging address being incorrect.
PARENTS WITH LOW AUTO LIMITS AND TEEN DRIVERS
According to the Centers for Disease Control, motor vehicle crashes are the leading cause of death among teens, with drivers between the ages of 15 to 20 accounting for 8% of all drivers involved in fatal crashes in 2017. Regardless of how well prepared your child may be, it is important to ensure your coverage limits are high enough to hopefully cover damages that may arise early on in their driving career.
Raising your policy limits and adding an umbrella policy will increase your premium. But, it also helps minimize the potential for major financial impact relating to damaging other vehicles or property, or worse yet catastrophic injuries to other drivers and passengers. Rather than lowering key coverage limits, consider raising the collision and comprehensive deductibles to offset the increase in premium.
LOW DWELLING LIMITS
Dwelling coverage or “Coverage A” is the portion of your homeowner’s policy that covers the costs to repair or rebuild your home after damage caused by a covered peril, such as fire.
Two out of every three homes in the nation are underinsured on their dwelling coverage.
The cost of rebuilding your home is based on local construction costs of labor and materials. If you receive bad advice and end up insuring your home for less the cost to rebuild it, you risk not having enough funds for repairs and could have to pay the difference on your own. For a small additional premium, obtaining 25% or 50% Additional Coverage A or Guaranteed Replacement
Cost, will help safeguard against a potentially higher than expected cost to re-build a your home. Ask a few reputable builders in your area what they are currently seeing as the average cost per square foot to build homes and double-check their figures against your dwelling coverage.
UNDERINSURED ADDITIONAL STRUCTURES ON THE PROPERTY
Many of my clients have additional structures on their property such as patios, fences, walls, sheds, detached garages, pools with pool houses, and guest homes or cottages. It is important to review whether you have appropriate limits in place to cover these areas.
For example, one of my clients had a pool with an 800 square foot pool house equipped with a kitchen, bathroom, and various hardscape areas. Upon review, they only had $81,300 in coverage, which initially seems like an adequate amount; however, you then have to consider there could be an $80,000-$90,000 gap in coverage should there be a fire or catastrophic storm that takes down trees, causes a crack in the pool deck, and levels the pool house. I was able to work with my client to raise their coverage to $171,000 with minimal impact to their premium. Again, price is important but having adequate coverage is invaluable.
HIGH NET WORTH INDIVIDUALS WITH INADEQUATE LIABILITY COVERAGE
With success comes great responsibilities, which include protecting your assets as they grow. The more assets you have, the more apt you are to be a target for lawsuits in the event of an auto accident or an injury incurred on your property. While everyone can benefit from the peace of mind an umbrella or excess liability policy offers, those with significant wealth should view this coverage as a necessity in the event their home and auto policies fall short. Many home and auto policies do not provide adequate coverage in the event of a major lawsuit.
I recently worked with a successful client who only had a $1 million umbrella policy. After discussing their overall net worth and future earning potential we decided a $5 million umbrella policy was more appropriate. I was able to add the increased umbrella limits while simultaneously increasing their home and auto coverage without increasing the premium they had been paying with a different agency. Putting this protection in place made them far more confident that, in the event of a catastrophic incident at home or an auto accident, they wouldn’t have to worry about losing everything they have worked so hard for.
Have questions about your home, auto or umbrella insurance? Contact us for help assessing your policies and finding the gaps covered in this post.
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Vice President | PRIVATE RISK
Mike Redfield is Vice President – Private Risk Advisor with RogersGray. From his previous professional experience he has worked with clients to provide insurance solutions for those planning for, and in retirement.
Insurance is confusing to many, Mike specializes in making it as painless as possible while putting together plans for his clients and presenting in an understandable way. Mike grew up in Yarmouth and now resides in Plymouth with his wife, children and their dog Mokie. You can connect with Mike on LinkedIn or by email.