(photo used under public domain)
If there’s something strange in your neighborhood, who you gonna call?
Hopefully, your insurance agent.
There are a number of ways you can protect your assets from disaster. Certain investment strategies can protect your money from market volatility or undue tax burden, and estate planning can protect your legacy for the future. But what about the assets you use every day, like your car, or engagement ring?
At Halpern Financial, we do not sell insurance (and we have no obligation to any bank, broker or insurer), but we do work with our clients’ insurance professionals to make sure their coverage fits seamlessly with the rest of their financial plan and that their assets are protected from certain risks. We spoke recently with Paul Forbes, owner of Paul Forbes Insurance Agency in the Reston, Virginia area who explained how to protect your assets if valuable property is damaged, and to clear up some common misconceptions about property and casualty insurance.
1. What is property and casualty insurance?
Typically you're talking about auto insurance, home insurance, renter’s insurance, or even business owner policies. It’s essentially anything to do with protecting people’s assets when a disaster occurs. Property and casualty insurance can cover anything from medical bills in a car accident to flooring and drywall replacement when a pipe bursts in the winter.
2. What do you recommend people do today to prepare for a potential claim?
One of the things we do when we review homeowner policies is we tell our clients to take a video of their home. Literally open up all the closets and drawers, walk through each room and catalog everything.
In my career of 18 years, I've had 6 total fire losses where everything was gone. In each one, no one ever knew what they owned! People know the big things like computers, TVs, and furniture. But you have no idea how many towels, dishes, pots and pans, and other odds and ends you have in your home. It's not so much that you have to prove this loss to the insurance agency—but going through this process will really help if a disaster does happen and you need to come up with a list of what needs to be replaced.
3. At what point do I need to insure individual items?
It depends on what the item is. Typically a homeowner policy is going to cover up to $5000 of blanket coverage for jewelry, watches, and furs. If you have items in those categories worth more than the blanket coverage amount, it is a good idea to get “scheduled” (itemized) coverage—for example, engagement rings are often worth far more than the limit. This requires you to provide an appraisal of value or a receipt to your insurance agent so you can purchase additional coverage for individual items.
What about insuring things other than jewelry, watches and furs? You can also get blanket coverage, scheduled coverage, or a combination of both for certain other types of property that are not covered in your homeowner blanket policy. For example, you could get scheduled coverage for one $20,000 piece of artwork, and blanket coverage of $20,000 for the rest of your art collection, covering no more than $4000 per individual item. For any scheduled items, you would need to provide a receipt or a professional appraisal of value, but for blanket coverage you do not need to do this.
4. What is the biggest mistake people make with auto insurance?
Sometimes people have very low deductibles because they don’t want to be responsible for any major costs if they have to file a claim. They pay a premium for that. But what people don’t think about is the fact that they will never put in a claim that low! Someone may carry a $250 deductible and pay more for that benefit, but then when damage occurs, they end up paying for the repairs out of pocket because they don’t want to go through insurance. So it doesn’t make sense to pay a premium for coverage you aren’t ever going to use.
Another mistake with auto insurance is having liability limits that are too low. Most people are understandably very concerned with the deductible—they want to know what they have to pay in an accident. But the most important part of the insurance is the liability coverage. The state of Virginia only requires you to have a policy covering $25,000 of bodily injury per person and $50,000 per accident. Medical costs can quickly surpass that amount in a serious accident, putting your assets at risk. When you have very low liability limits, it’s as if you are driving around with your life savings in the trunk!
5. What should I do first when something gets damaged and I need to file a claim?
Obviously if your home is on fire, after you call the fire department, call the insurance agency directly. That is definitely going to result in a claim. But if it's not an emergency, talk with your agent! You can save money by approaching claims in a strategic way.
Your agent will give you an idea of what is covered versus what is not before you file the claim. Often, things happen in your home and it's not as bad as it looks. For example, say you have five or six fallen roof shingles on your driveway after a wind storm. Wind damage is normally covered, but most homeowner policies have a minimum $1000 deductible, sometimes higher. The cost to put those shingles back on the roof may be just $600 or $700, well under the deductible. If you call the 1-800 number to file an insurance claim, now you have a claim on your policy that isn’t going to be covered. It's always good to call the agent to figure out how best to handle your situation.
6. Are there other common damages that people may not realize are not covered?
Tree falls. If a tree falls it has to actually hit something to be covered, like a shed or a fence. If it just falls on the ground there's no coverage for that. We get those calls a lot! But once you file a claim you can't take it back. For these types of non-emergency property damage, it’s always a good idea to call your agent, find out what's really going on and they can advise you how to handle it.
Many thanks to Paul Forbes for his expertise! We just scratched the surface of this topic but we hope this article will be helpful to you the next time a hailstorm occurs or a tree falls on your fence. These aren’t things we ever want to happen, but having a plan when emergencies occur can really increase your peace of mind!
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