Wednesday, December 29, 2010

Even professional wrestlers know you should have the right insurance coverage!

     Ask WWF superstar Hulk Hogan how he feels about adequate insurance coverage, and he'll LAY IT ON YA, BROTHER (said in my best Hulkster voice)! Hulk Hogan sued his insurance company earlier this year claiming it was their fault he did not have the proper insurance coverage. I want to make sure the same thing doesn't happen with any of my clients! Here's the story as reported by

"CLEARWATER - Professional wrestler Hulk Hogan claimed in a lawsuit filed today that his insurance company failed to upgrade his coverage when his exposure to risk grew, leaving him inadequately insured when his teenage son Nick Bollea got into a wreck that left a passenger grievously injured.

As a result, Hogan, whose real name is Terry Bollea, had to use some of his own money to settle out-of-court a lawsuit filed by the estate of the passenger, John Graziano, because Hogan's insurance was inadequate, the seven-page lawsuit says.

The suit was filed against Wells Fargo Southeast, which has been subsumed by Wells Fargo USA. The company has provided Hogan insurance for nearly 10 years, with coverage for his homes, boats, watercraft and motor vehicles.

The company has collected tens of thousands of dollars in premiums from Hogan and routinely promised to minimize the celebrity's risk, the lawsuit says. Despite Hogan's substantial wealth, however, the company never advised him to increase his insurance or buy an umbrella policy, two avenues the company could have pursued.

One reason to increase Hogan's insurance, Hogan claims, is that his risk grew considerably when his children became teenagers and were able to drive his various cars, the lawsuit says.

"Wells Fargo Southeast had a duty to perform an ongoing insurance evaluation and, at the very least, a yearly or biannual insurance review with Hogan, complete with professional advice and coverage recommendations," the lawsuit says.

"Such a review would have demonstrated that Hogan required an excess/umbrella policy in an amount that appropriately corresponded to his substantial assets and the risk to which they were exposed," the lawsuit says.

"Each time a teenage driver, a vehicle, a watercraft or a piece of real estate was added to Hogan's insurance policies, Hogan's risk increased; however, his insurance coverage remained woefully inadequate, and Wells Fargo Southeast still failed to consult Hogan regarding the advisability of increased coverage and an excess/umbrella policy," the lawsuit says.

Graziano suffered a severe brain injury Aug. 26, 2007, when a car driven by Nick Bollea crashed into a palm tree in Clearwater while Bollea was racing with a friend, authorities have said. Bollea served 166 days in jail after he pleaded no contest to a reckless driving charge.

Graziano's medical bills and continuing care far exceeded the policy limits of $250,000 per person, Hogan's lawsuit says. With no additional insurance, Hogan's fortune then of roughly $30 million was exposed and unprotected, the lawsuit says.

In addition, Hogan had signed for his son's driver's license, which exposed him as an individual to liability, the lawsuit says. Wells Fargo Southeast should have known this, the lawsuit says.

Had Wells Fargo Southeast adequately insured him, Hogan says he would not have had to dip into his personal fortune to settle the lawsuit filed by Graziano's guardian, Hogan's lawsuit says. The amount of that settlement has never been disclosed."

There are a few valuable lessons to be learned from the Hulk's situation. Make sure you sit down with your insurance agent every year or two and discuss what's going on in your life. You might need new coverage, different coverage or less coverage depending on what you've got going on. It's hard for your agent to make recommendations about protection if they have no idea what you're up to.

Secondly, you don't have to be a multi-millionaire to have someone sue you for a million dollars (or more)! In Colorado you are responsible for all of the damages you cause in a car accident. If you do not have enough insurance to pay the bills, the bills do NOT go away. The money just comes out of your pocket instead of the insurance company's.

Talk to your local, professional agent and find out if your insurance coverage is adequate. It will keep your finances from getting body slammed!

Monday, October 18, 2010

Vicci's Story

     Vicci Grey was run down by a drunk driver and abandoned on the side of the road. Now on the road to recovery, Vicci is trying to work through the physical and financial pain that the accident has caused her.

"I was on the way home from my daughter's 37th birthday party and I saw a truck ahead of me in the road that seemed to be out of control. He was on the wrong side of the road. All of a sudden it seemed as though he slammed his foot on the gas and veered straight towards me. I thought that if I could just turn the corner on the next street maybe I could keep him from hitting me. I couldn't get out of the way fast enough, and he broadsided me."

The driver that hit Vicci was driving a Lincoln Navigator. After he crossed the median into Vicci's lane and hit her, the driver and his passenger got out of the truck and ran. Both were heavily intoxicated and wanted to get away before the police arrived. Neither of them checked to see if Vicci was alive, if she was hurt, or if she needed help. She was hurt. She did need help. Both cars were totalled.

"I couldn't get out of my car, I couldn't even try. I wanted to find my cell phone so I could call my kids and let them know I was in an accident but my neck had swollen up and I couldn't turn my head. My arm had gone completely numb and I couldn't really move."

Fortunately for Vicci, someone in a nearby house had heard the accident and called the police. Within 5 minutes they were on scene and the firemen were cutting Vicci out of her car with the jaws of life. Before she really knew what was going on, Vicci was at the hospital. The accident had fractured Vicci's C6 and C7 vertebrae and cause extensive nerve and muscle damage. Vicci spent the next three days in the hospital before being sent home on oxygen for 2 months of bed rest and physical therapy.

The police found the passenger in a Walgreens near the site of the accident that night. After 2 months, the police have still not located the driver. The passenger admitted to police that they had both been drinking and that he had told the driver many times that he should not be driving, but he didn't listen. Although the driver does own a home in Colorado Springs, he had recently lost his job and was not living at home due to a domestic violence case with his wife. Although the driver did have insurance, Vicci was about to find out how little he had and how little it would help.

Vicci has not been able to drive or return to work in the two months since the accident. She has been walking to a nearby physical therapist 3 times a week in an effort to recover and regain her full mobility. About a month and a half after the accident, Vicci was finally able to get to her car and retrieve some of her belongings.

"When I finally saw my car, it was truly devastating", says Vicci. "It was like looking at death, it was absolutely horrible." Vicci soon found out that the driver's insurance policy was not going to be enough to pay for her car because the driver had such low limits. "The insurance that he had should be against the law. He had the barest of bare minimum that would pay $25,000 for my medical bills and work loss and up to $15,000 for my car." Vicci's hospital bills were already over the $25,000. Add in the work loss, physical therapy, oxygen for her home, neurologist visits, etc. and things really start to add up. Vicci's car was also a total loss and cost well over the $15,000 provided by the other driver's insurance policy.

Fortunately for Vicci, her own insurance policy DID have the right coverage to protect her. Her own insurance policy DID pay off her car and WILL take care of her medical bills, physical therapy, work loss and anything else that Vicci needs to get back to normal.

"It was a relief to find out what kind of insurance coverage I had. I had not paid much attention to my own insurance coverage because I had no reason to. I'm a good driver and I've never hit anyone. You always think that it's not going to happen to me, you always think that you're the invincible one so you don't think much about your coverage. You only think about trying to save money here and there. I'm truly thankful for what I have on my policy to take care of me."

After two full months, Vicci was finally cleared to start working again...slowly. She'll have to take it easy for the next few months, taking frequent breaks and limiting her driving but she needs to get back to work and is grateful for her progress so far.

"My insurance policy with American National has pretty much sustained me. It paid off my car and is helping me with a rental car. The service has been phenomenal. Trying to deal with his (the other driver's) insurance has been a nightmare, it's been a full time job."

When asked if she had any words of advice regarding what she's learned from her ordeal, Vicci had this to say: "Make sure that you have good insurance coverage. Even if you think you're just giving your money away  because this sort of thing could never happen to you, you just don't know. You can never know for sure. Having the right insurance has made the difference between being destitute and being okay; between being under a bridge and being here at home. You need to have someone to sit down and talk to and then listen to what they say about protecting yourself. It's not about anyone trying to sell you insurance, It's about you and what you need. If it had not been for Robert and American National I would be devastated. I still have a long way to go, but I thank God for all that's been done for me."

Vicci has been through a lot and learned first-hand the value of having the right insurance to stay protected. She's been a great client for years and I appreciate her sharing her story and wish her a full and speedy recovery.

Saturday, October 16, 2010

New Study Reveals Home Owners Know LITTLE About Their Home Insurance

I recently came across a study from Zogby International that asked the question "how much do people know about the insurance for their most valuable asset - their home?" The answer was alarming to say the least. The majority of home owners have some very mistaken ideas about what their home insurance does - and does NOT - cover. Unfortunately, some home owners will find themselves very under insured if they don't take action, while others are obviously over paying for coverage they may not need. Read the full report below:

Homeowners Coverage Knowledge Gap Wide Among Consumers

Many Americans admit to having a knowledge gap when it comes to what their home insurance actually covers, according to a new survey.
Nearly one third (31 percent) of Americans don't know how much their most valuable assets -- their homes -- are insured for, and an additional 46 percent don't know how much coverage they have for their homes' contents, such as furniture and clothing, say the results of a survey by Zogby International for MetLife Auto & Home. Additionally, many homeowners aren't aware of coverage overlaps that may exist, which could result in opportunities to save money.
The first of a two-part "Insurance Literacy" survey, tested consumer knowledge of insurance basics, including homeowners, condo, and renter's insurance.
Common misconceptions that could lead to coverage gaps were:
-- Thirty percent of homeowners believe their insurance coverage is based on the current market value of their home. Actually, the available coverage limit for homeowners insurance is based on the cost to rebuild the home, a mistake that could lead to confusion for homeowners trying to evaluate whether they have the right amount of insurance.
-- More than two thirds (71 percent) of those surveyed believe insurance pays for the full cost to rebuild their property in the event of a major loss, such as a fire or other natural disaster. But nearly all insurance companies "cap" the amount paid to rebuild the dwelling following a total loss, unless additional coverage is purchased. Furthermore, the coverage is subject to a deductible, and certain causes of loss, such as water damage caused by the natural disasters of flooding, are excluded completely.
-- Almost three-quarters (73 percent) believe insurance will pay the full cost to replace personal belongings in the event of a loss. However, depreciation is usually factored in, unless optional replacement coverage is selected, and the coverage, regardless of the chosen settlement method, is subject to a deductible.
-- Sixty percent believe insurance will pay for the full cost of replacing valuables, such as jewelry and collectibles. Most insurance policies contain a payment cap for replacing valuables, although additional coverage can be purchased, and the coverage is subject to a deductible.
-- For a major loss, nearly two-thirds (64 percent) of those surveyed expect their insurance to cover any building code mandated upgrades that are necessary. Without an endorsement/rider, most home insurance does not cover required upgrades located in an undamaged portion of the home.
"More than two-thirds of consumers surveyed also said they'd rather pay a higher premium than be told that a loss isn't covered," said Bill Moore, president of MetLife Auto & Home. "To ensure this doesn't happen, consumers can find the best value by learning more about their policies and selecting the coverage that best meets their needs, rather than simply shopping for the lowest premium."
On a positive note, with purse strings tight, opportunities exist for consumers to become more aware of what their current policies do cover in the event of a loss, to avoid insurance overlaps and unnecessary out-of-pocket expenses. For example:
-- Electronically downloaded and stored entertainment, such as music, ring tones, etc., can be expensive to replace without easy access to free re-downloads. However, more than 90 percent of homeowners didn't know that insurance can extend coverage to electronic data.
-- Almost half (47 percent) didn't realize there's no need to secure additional coverage to insure the personal property of college-age children living on campus. This is covered under the standard homeowners contract, subject to its terms and conditions.
-- Many homeowners would be surprised to learn that damage to appliances and wiring from a power surge would be covered by their insurance policy. More than half (59 percent) didn't think it would -- limiting out-of-pocket expenses to a deductible.
Natural Disasters
Many homeowners exhibit confusion about insurance coverage for natural disasters and unforeseen occurrences. The majority of homeowners understand that flood damage is written on a separate policy from their standard insurance policies. However, many consumers are still misinformed -- or unsure -- about the coverage available for other types of events.
In some cases, homeowners are aware of the potential for a loss, but don't realize what coverage they have against a particular hazard. Among other things:
-- Although 83 percent believe foundation damage from earth movement is very serious or somewhat serious, only 37 percent know they aren't covered for this under the standard homeowners policy.
-- More than a quarter (28 percent) incorrectly believe they'd be covered for an earthquake or volcanic eruption, and the same amount aren't sure one way or the other. Most standard policies exclude this peril.
-- For water damage from a sewer or sump-pump back up, 67 percent of homeowners believe this would be covered. Without the appropriate rider, most policies don't cover this.
The Zogby/MetLife Auto & Home homeowners insurance survey sample consisted of interviews with 1,196 adults who have homeowners, condo, or renter's insurance, and who are living in a household with a telephone. The interviewing was conducted May 26, to June 9, 2010.
Source: MetLife Inc.

Sunday, August 29, 2010

Insurance Implications on Buying a New Home

Home Buyers Insurance Checklist

Shopping for your dream house? There are many considerations when looking at real estate, such as property taxes, school district, available recreational opportunities in the neighborhood, to name a few. But an important and often overlooked consideration is the insurance implications of your purchase. You will be paying insurance on your home for as long as you own it, so you should factor the cost of insurance into the home-buying process. You don’t want to find out that your dream home is more expensive to insure than you thought—after you own it!

 Before You Start Looking for a Home

Thinking through all the costs associated with buying a home will make the process run more smoothly, and it may also save you money. It is important to:

Check Your Credit Rating

A good credit history helps you in many ways. Good credit makes it easier to get a mortgage at a competitive rate, and it may also qualify you for a good credit discount on your insurance. Make sure you know your credit rating before you apply for a mortgage. Get a copy of one or all of your credit reports. Make sure they are accurate and report any mistakes immediately. If your credit is not as good as it could be take steps now to improve it. The I.I.I. has information on credit and insurance to help you with this process

Protect Yourself with a Renters Insurance Policy

If you are currently renting a house or apartment, protect yourself financially with a renters insurance policy. This provides insurance protection in the event a fire, hurricane or other insured disaster damages or destroys your personal possessions. It also covers the cost of additional living expenses if something happens to make your rental home or apartment unlivable. Additionally, renters insurance gives you liability protection if someone is injured in your home and decides to sue you. Disasters happen, and it would be unfortunate to have to use the down payment you saved to buy your new home to pay for losses that could have been covered by renters insurance. Furthermore, having a renters insurance policy provides a useful insurance
history to your prospective homeowners insurer when you go to buy your first home.

While House Hunting

As you search for your new home, remember that the physical characteristics of the house—its size, location, construction and overall condition—can affect the cost, choice and availability of home insurance. Following are some factors to consider when shopping for a home:

Quality and Location of the Fire Department

Houses that are located near highly-rated, permanently staffed fire departments usually cost less to insure. This also holds true for homes that have a hydrant nearby. An important underwriting criterion for insurance companies is a community’s investment in fire protection, which includes trained firefighters, proper equipment and adequate supplies of water.

Proximity to the Coastline
Houses located on or near the coast will generally cost more to insure than those further inland. There will also likely be a hurricane or windstorm deductible. This is a percentage deductible based on the cost to rebuilding a home, rather than a flat dollar amount. With a homeowners policy that has a $500 standard deductible, for example, the policyholder pays the first $500 of the claim before insurance kicks in. However, as percentage deductibles are based on the home’s insured value, if a house is insured for $100,000 and has a 2 percent deductible, the first $2,000 of a claim is paid out of the policyholder’s pocket.

There are two kinds of wind damage deductibles: hurricane deductibles, which apply to damage solely from hurricanes; and windstorm or wind/hail deductibles, which apply to any kind of wind damage. Percentage deductibles typically vary by state and range from 1 percent to 5 percent of a home’s insured value. These come into effect if certain triggers occur—a deductible triggering event can be, for instance, an official National Weather Service declaration that a storm is generating hurricane-strength winds (i.e., 74 miles per hour, or more) in your community.

In coastal areas with high wind risk, some homeowners may select higher hurricane deductibles to lower their insurance premiums, but that means they pay more if their home is damaged. In some coastal communities, private homeowners insurance coverage may not be readily available. Instead, you may need to purchase insurance through a state-run insurance program, which can provide less coverage, and in some cases be more costly, than private insurance.

Age of the Home

A stately, older home can be quite beautiful, but ornate features such as plaster walls, ceiling molding and wooden floors may be costly to replace and raise the cost of insurance. Plumbing and electrical systems can become unsafe with age and lack of maintenance. So, older homes may cost more to insure. If you are considering buying an older home find out how much it will cost to update these features and factor it into the cost of ownership.

Condition of the Roof

Ask about the condition of the roof. A new roof matters to insurers and keeps you and your family safer. Depending on the type of roof and whether or not you use fire and/or hail resistant materials, you may even qualify for a discount. Talk to your insurer about qualifying discounts.

Is the Home Well-Built and Up to Code?

Find out whether the house has been updated to comply with current building codes. Homes built by careful craftsmen and those built to meet modern engineering-based building codes are likely to better withstand natural disasters. Consider hiring a licensed home inspector who is knowledgeable about the latest building codes to inspect the property before you sign a mortgage.

Risk of Flooding

Damage from flooding is NOT covered by standard home insurance policies. If you are buying a home in an area at risk from flooding, you will need to purchase separate insurance. Insurancefor flooding is available from the federal government’s National Flood Insurance Program (NFIP), which is serviced by private carriers, and from a few specialty insurers. People often underestimate the risk of flooding. Ninety percent of all natural disasters in the U.S. involve flooding, according to the NFIP. More important is that 25 to 30 percent of all paid losses for flooding are for damage in areas not officially designated as special flood hazard areas. If you are not in a high-risk flood zone, NFIP coverage is available at a lower premium.

History of Earthquakes

While earthquakes are most frequently associated with California, they have occurred in 39 states and, like flooding, are not covered under standard home insurance policies. Earthquake insurance is available from private insurers as an endorsement to a homeowners policy, and in California from the California Earthquake Authority, a privately funded, publicly managed organization. The cost of earthquake insurance differs widely by location, insurer and the type of structure being covered. Generally, older buildings cost more to insure than new ones. Wood frame structures may benefit from lower rates than brick buildings because they tend to withstand quake stresses better. Regions are graded on a scale of 1 to 5 for likelihood of quakes, and this
difference is reflected in insurance rates.

Swimming Pool or Other Special Feature

If the house has a swimming pool, hot tub or other special feature, you will likely need more liability insurance. You may also want to consider purchasing an excess or umbrella liability policy to provide added protection in the event someone gets injured on your property and decides tosue you.

Before You Place a Bid on the Home

Check the Loss History Report

Ask the current owner of the house for a copy of the insurance loss history report, such as a Comprehensive Loss Underwriting Exchange (C.L.U.E.) report from ChoicePoint or an A-PLUS report from ISO, a leading source of information about property/casualty insurance. This is a record of insurance claims on the house that can provide answers to two questions that any savvy homebuyer should ask:

Have there been any past problems in the home?

If damage has occurred, was it properly repaired?

Note that prior claims are not a barrier to getting insurance. In fact, sometimes a recent claim can have positive ramifications. If, for example, a roof was damaged by a wind storm and replaced by a new one, this would make the house more desirable to an insurance company. If there have been no claims within five years, there will be no loss history report on the home.

Get the House Inspected

A thorough inspection of the home is very important. The inspector should:

  • check the general condition of the home;
  • look for water damage, termites and other types of infestation;
  • pay special attention to the electrical system, septic tank and water heater;
  • show you where potential problems might develop;
  • double-check that past problems have been repaired;
  • suggest upgrades or replacements that may be needed.
If the inspector raises questions, your insurance company will as well. And, be sure to find out if there is an underground oil storage tank, as many insurers will not provide policies for homes that have one.

Determine How Much It Will Cost to Maintain the House

Routine maintenance is your responsibility as a homeowner. Losses caused by failing to properly care for your home are not covered by standard homeowners insurance policies. The yearly cost of taking care of your house is another factor to be included in the overall price of owning the home.

Call Your Insurance Representative

Don’t wait until the last minute to think about insurance. Ask your insurance professional if the house will qualify for insurance, and get an estimate of the premium. The sooner you act, thesmoother the process will be. Don’t be shy about asking for estimates on more than one house. Insurance is an important consideration when purchasing a home. If you are uncomfortable with the cost of insuring a particular house, keep looking for one that better fits your financial situation. If you do not already have an insurance agent or company representative, get recommendations from family, friends or co-workers, or consult your state insurance department.

Purchasing Insurance for your New Home

When purchasing a home insurance policy, work with your insurance agent or company representative to get enough insurance to rebuild the house in the event of a total loss. No new home buyers want to think that their house could go up in flames, but disasters do happen. It’s important to have enough insurance to completely rebuild your home and replace all of your personal possessions. You also need to make sure you have enough liability insurance to protect your financial assets. Ask about additional coverage such as:

  • Replacement cost for personal possessions
  • Extended or guaranteed replacement cost for the structure
  • Building code upgrades
  • Sewer and drain back-up coverage
  • Inflation-guard
  • Umbrella coverage for a pool or other high-risk items
  • Special riders for jewelry, collectibles and expensive items
To save money on your homeowners insurance, shop around and take the highest deductible you can afford. Since most people only file a claim every eight to 10 years, having a higher deductible saves money over time and preserves your insurance for when it’s really needed. You can also ask about available discounts for:

  • Multi-policy (home, car or other policies with the same company)
  • Smoke detectors
  • Fire extinguishers
  • Sprinkler systems
  • Burglar and fire alarms that alert an outside service
  • Deadbolt locks and fire-safe window grates
  • Being 55 years old and/or retired
  • Long-time policyholder
  • Upgrades to plumbing, heating and electrical systems
  • Earthquake retrofitting to make the home safer
  • Wind-resistant shutters

Additional Resources

  • ChoicePoint
  • CLUE reports
  • Fair Isaac
  • To order a credit report,
  • For help in determining your credit score, call 800-777-2066
  • Institute for Business & Home Safety
  • ISO
    • -To order a copy of your A-PLUS report, call 800-709-8842
    • -For up-to-date information on fire protection services throughout the country, see the Public Protection Classification program
  • National Flood Insurance Program
This article was printed by the Insurance Information Institute. More information about teh Insurance Information Institute can be found by visiting their website at

Thursday, July 15, 2010

"My $90,000 Car Isn't Covered By Your 15 Minute Insurance"

The good news: Last month you spent the 15 minutes needed to save $15 a month on your car insurance...hooray, that's $180 per year (that's a whopping 50 cents a day!)

The bad news: This month you rear-ended a jerk with a seriously bad attitude driving his $90,000 ego (his car) and now you're about to find out how good your 15 minute insurance coverage really is.

So what's REALLY important when it comes to your car insurance?  Saving $15 a month is nice, who wouldn't want an extra $180 per year in their pocket, but is saving $15 a month that important when your thinking about your insurance? Here are a few things of even greater importance to consider when buying your car insurance:
  1. In Colorado, if you cause the damage you pay the bills. If you do not carry enough insurance to cover the costs (like the previously mentioned $90,000 car) than the rest comes out of your pocket. Carrying lower liability limits (one way the 15 minute insurance companies use to lower your rates) is only smart if you never have an accident and who knows if you'll ever have an accident - that's why there called "accidents and not "on purposes."
  2. The number of uninsured drivers in Colorado is on the rise and reaching record numbers. If one of them hits you and you can't work for a month, what's the chance they're going to have enough money to cover your medical bills, work loss and pain and suffering? Yes, they owe you the money but if they can't even afford to pay insurance you're probably not going to get much out of them. Carrying higher uninsured motorist coverage is a wise idea in this era of increased uninsured drivers. Providing lower coverage is another way the 15 minute insurance providers lower your cost)
No agent, no guidance, no help with choosing the right coverage to protect you from the over paid jerk in the $90,000 car that you just rear-ended. Sometimes 15 minutes COSTS you in the when you're being sued for the things you new insurance policy doesn't cover.

Talk to a local, professional agent to find out what coverage you do and do not need to get the best insurance value - the PROPER coverage for the best price.

Robert Edgin

Wednesday, July 7, 2010

Tips For Insuring Your Home - The Structure & Personal Property

Insurance is something most people don’t even want to think about until they need it the most. But, understanding what is and isn’t covered in your homeowners insurance policy can mean the difference of being able to rebuild your home and replace your personal belongings. Homeowners need to do annual insurance policy "check ups" to make sure they keep up with local building costs, home remodeling and inventories of their personal belongings.

The typical homeowners insurance policy covers damage resulting from fire, windstorm, hail, water damage (excluding flooding), riots and explosion as well as other causes of loss, such as theft and the extra cost of living elsewhere which the structure is being repaired or rebuilt.
Your policy also covers your legal liability (up to policy limits) if you, members of your family or even your pets hurt other people or their property, not just in your house, but away from it, as well. Click here for more information on general liability coverage and umbrella policies.
When you insure your home, you are really insuring two distinct things:

1. The Structure
2. Your Personal Property

There are three options to insure the structure of your home:

1.Replacement Cost. Insurance that pays the policyholder the cost of replacing the damaged property without deduction for depreciation, but limited to a maximum dollar amount.

2.Extended Replacement Cost. An extended replacement cost policy, one that covers costs up to a certain percentage over the limit (usually 20%). This gives you protection against such things as a sudden increase in construction costs.

3.Actual Cash Value. This covers the cost to replace your home minus depreciation costs for age and use. For example, if the life expectancy of your roof is 20 years and your roof is 15 years old, the cost to replace it in today’s marketplace is going to be much higher than its actual cash value.

Tips for Insuring Your Home to Value

You should insure your home for the total amount it would cost to rebuild your home if it were destroyed. That’s not the market value, but the cost to rebuild. If you don’t have sufficient insurance, your company may only pay a portion of the cost of replacing or repairing damaged items. Here are some tips to help make sure you have enough insurance:

•For a quick estimate on the amount to rebuild your home: multiply the local building costs per square foot by the total square footage of your house. To find out the building rates in your area, consult your local builders association or a reputable builder. You should also check with your insurance agent or company representative. (Note: This is only an estimate and shouldn’t replace annual coverage reviews).

•Factors that will determine the cost to rebuild your home: a) construction costs b) square footage of the structure c) type of exterior wall construction—frame, masonry or veneer d) the style of the house (ranch, colonial) e) the number of rooms & bathrooms f) the type of roof g) attached garages, fireplaces, exterior trim and other special features like arched windows or unique interior trim.

•Check the value of your insurance policy against rising local building cost EACH YEAR. Check with your insurance agent or company representative if they offer an "INFLATION GUARD CLAUSE." This automatically adjusts the dwelling limit when you renew your policy to reflect current construction costs in your area. However, you still should keep up with local building costs by checking in periodically with your local builders association.

•Check the latest building codes in your community. Building codes require structures to be constructed to minimum standards. If your home is severely damaged, you might have to rebuild it to comply with the new standards requiring a change in design or building materials. These generally cost more.

•Do not insure your home for the market value. The cost of rebuilding your home may be higher or lower than the price you paid for it or the price you could sell it for today.

•Most lenders require you to buy enough insurance to cover the amount of your mortgage. Make sure it’s also enough to cover the cost of rebuilding.

•Advise your insurer and increase the limits of your policy if you make improvements or additions to your house.

Two ways to insure your personal belongings:
1.Replacement Cost Coverage. Insurance that pays the dollar amount needed to replace damaged personal property with items of like kind or quality without deduction for depreciation.

2.Actual Cash Value. Insurance under which the policyholder receives an amount equal to the replacement value of damaged property minus depreciation. Unless a homeowners policy specifies that property is covered for its replacement value, the coverage is for actual cash value.

Here are a few things to keep in mind when you’re insuring your stuff:

•Check the limits of your policy on personal items, such as jewelry, silverware, furs and computer equipment. If the limits are too low, consider buying a special personal property endorsement or a "floater." An endorsement is an addition to your policy. A floater is a form of insurance that allows you to insure valuable items separately.

•Make an inventory of everything you own in your home and in other buildings on the property. Write down major items you own along with all available information, such as (a) serial numbers (b) make and/or model numbers (c) purchase prices (d) present value (e) date of purchase. Click here for more on home inventories.

•Document your inventory. Take either still or video pictures and attach receipts to the inventory when available. Store the inventory and visual records AWAY from your home—perhaps in a safe deposit box.

•Update the inventory when you make major purchases.

The most important thing you can do to safeguard your home and property is to understand that your insurance policy is a contract and you need to know what’s in it. Your insurance agent or company representative will be able to walk you though it and answer any questions.

The bottom line: Don’t put your policy up on a shelf somewhere and let it collect dust! Review your policy every year.

Colorado Hail Storms - What You Should Do

Last year's hail season was the most expensive in Colorado History, causing $1.3 Billion dollars in damage across the state. Below is some great information posted on the RMIIA website.

Colorado Hail Statistics

Colorado’s damaging hail season is considered to be from mid-April to mid-August. Colorado’s Front Range is located in the heart of "Hail Alley," which receives the highest frequency of large hail in North America and most of the world, so residents usually can count on three or four catastrophic (defined as at least $25 million in insured damage) hailstorms every year. In the last 10 years, hailstorms have caused more than $3 billion in insured damage in Colorado. As a result, up to one-half of your homeowners insurance premium may be going toward hail and wind damage costs. If you carry comprehensive coverage on your auto policy, hail damage is covered by almost all insurance companies. Comprehensive insurance is optional, but if you live in a hail prone area, the insurance industry recommends this coverage.

What to Do After a Hailstorm

First, if a Hailstorm Strikes, don’t go out in the storm to try to protect your property. You could be injured.

Assess the damage.

•Check trees, shrubs and plants around your house. If they are stripped of their foliage, there is a possibility that your roof is damaged. You should also check for roof damage if patio covers, screens or soft aluminum roof vents are dented.

•Check your car for dents and broken or cracked glass.

Protect your property from further damage.

•If you find signs that hail has battered your property, take immediate steps to protect it from further damage.

•Cover any broken windows and holes in your roof so that no water can enter and damage your home’s interior.

•Cover any broken glass in your car to prevent damage to the interior from rain and remove glass from the car’s interior to prevent cuts in upholstery and carpet.

File your claim

•Call your agent or company as soon as you notice damage. Practically all homeowners policies cover hail damage. You car will be covered if you’ve purchased comprehensive coverage.

•If your agent or company requests you to do so, follow up your call with a written explanation of what happened.

•Save receipts for what you spend and submit them to your insurance company for reimbursement.

Select a repair company.

•After an insurance adjuster has surveyed the hail damage to your property, select a reputable roofing company or auto body shop to make repairs.

•Allow only the insurance adjuster and roofer you have selected to get up on your roof. Each time someone walks on it, more damage can occur.

•Be wary of out-of-town roofers who move into an area and set up shop following a storm. While most of these firms are reputable, some have collected money from homeowners and moved on to the next storm site without paying suppliers or leaving work unfinished. This can leave homeowners holding the bag for those additional costs. It’s a good idea to select a company with established credibility and local references. Word of mouth is still your best guide.

•Be sure roofers have workers compensation and liability insurance. If they don’t, you may be held liable if one of the workers is injured or if they damage a neighbor’s property.

•Don’t make final payment to the roofing company until your roof has been inspected and you are satisfied.

Use hail resistive roofing materials.

•When building a new home or replacing your roof consider using hail-resistive roofing products. The insurance industry has an Underwriters Laboratory standard ranking, the UL 2218 standard. The standard has four impact-level designations that will help you compare products. Roof coverings that show the most resistance earn a Class 4 rating; the least, a Class 1 rating.

•Impact-resistant Roofs: Smart Steps to Reduce Hailstorm Damage is a free, online learning experience that consists of four self-paced learning modules. It teaches homeowners and other consumers about the benefits of installing impact-resistant residential roofing products.

Tuesday, May 4, 2010

Ways To Save Money On Teen Driver's Insurance

It's time to hand over the keys to your newly licensed 16 year old. But how do you do it without also handing over 1/2 of your paycheck to your car insurance company? Teenagers are one of the leading cause for auto insurance claims, which means adding a teen driver to your insurance policy can be expensive. But there are some ways to cut your teen driver's insurance costs; here are some of the top tips.

Good Grades: The good grade discount for students will typically save you 15% on their insurance premiums. In order to qualify, most companies require a 3.0 or better cumulative GPA. However, some teen friendly companies offer some additional ways to get the discount including being on the honor roll or dean's list.

Driver's Training: While all companies give a discount for teens who take driver's ed classes (usually 15%), not all classes qualify for the discount. Most insurers require that the classes have a certain amount of behind the wheel time led by a state approved instructor. On-line courses and parent-led courses usually do NOT qualify for a discount. Most companies want to see a state approved course with at least 6 hours of street time included.

Teen Friendly Companies: When it comes to teen driver's, all insurance companies are NOT created equal. Some companies want to avoid teenage drivers at all costs, and the easiest way to do that is to make the rates extremely high. Prices can vary dramatically between companies, so if your current insurer's price seems unreasonable make some calls and check around. With our exclusive TeenSafe DriverTM program, we've had clients come to us who were paying as much as an additional $100 per month MORE than they needed to be simply because they were insured with the wrong company.

Monitored Driving: Some teen friendly companies are helping you keep your teen safe and lower your insurance costs at the same time by giving you the opportunity to monitor your child's driving. Monitoring devices can be installed in your teen's car that alert you to speed violations, aggressive driving patterns, boundary violations and a whole lot more. With most companies, the information is strictly for the parents (it is not shared with the insurance company) so it can be used to give instructions and mentoring on safer driving habits. TeenSafe DriverTM companies know you want your teen to get home safely, and give you tools to help make sure that happens. The bonus is that you can  also get up to 15% off of your teen's insurance costs.

No New Cars!: If you are going to surprise your teen with a new car, make sure it's only new to them. A newer car that requires full coverage is a sure way to skyrocket your insurance costs. Since an overwhelming amount of teens have accidents during their first 24 months of driving, the cost for collision coverage on their car can be quite expensive. Buying a gently used car that does NOT require financing will not require full coverage insurance and will save you big bucks. (To find a car that performs well in safety tests, visit

Who's Driving What?: Talk to your agent about how they're matching up the cars and drivers in your household. There's a lot of money to be saved by pairing the right driver to the right car, and your agent should know the right way to rate your teen driver. The best way to find out is to ask "did you rate my teenager to the least expensive car?"

On average, Colorado families should be paying less around $40 per month for you teen that does NOT have their own car, and around $80 per month for your teen that DOES have their own car (with liability only). If you're paying more, you're probably paying too much!

Sunday, April 4, 2010

Should You Buy Identity Theft Coverage?

Its 2010, so I know that if you're smart enough to figure out the internet and stumble across a blog (like this one as an example), then you're smart enough to know what identity theft is. You know it's out there happening to people every minute of every day, but will it happen to you? With more than 10,000,000 identity theft victims in 2008 alone* chances are it could happen to you, and since it takes an average of 330 hours of work to repair the damage** you should be prepared for it! The easiest way to protect yourself is with Identity Theft Protection, but where's the best (and cheapest) place to get it?

Google the words "Identity Theft Protection" and you'll get around 52 million results, which makes the question of where to get the best protection for the best a price more than a little overwhelming. Your bank, credit card provider, AND a myriad of on-line companies are all happy to help you protect yourself for $10 - $20 per month, but they usually don't include coverage for your family. One of the best (and most affordable) places to stay protected is through your local, professional insurance agent.

Most insurance companies that sell home insurance also sell identity theft protection as an additional rider on your insurance policy. Not all coverage is the same so you'll want to talk to your agent about specific coverage and exclusions, but most companies include the following benefits for the insurance clients:
  1. Coverage is included for everyone in the family for one set price. No need to pay fees for each member of your household.
  2. Coverage usually includes monitoring so you can be notified early of any fraudulent activity.
  3. You'll have a multi-million (or multi-billion) dollar company AND their team of attorneys working on your behalf to fix any problems.
  4. Coverage typically includes incidental charges like lost wages in case you have to miss work to help clear up any problems.
  5. Insurance companies are regulated by each state where as independent identity theft protection companies may not be. The result, more consistent results from insurance companies and a place to turn (the state insurance commissioner's office) if your protection plan does not do what it is supposed to.
The best part about getting your identity theft protection through your insurance company is the competitive pricing. At about $7.50 per month for the entire family the price is tough to beat. Insurance companies already have a vested interest in protecting your family, and if they can add on a service that you might buy elsewhere then it solidifies your relationship and keeps you as a client for longer. It's a proven fact, the more things your insurance company takes care of for you, the more loyal you are and the longer you remain a customer. Besides, insurance companies already have teams of attorneys on staff; having them take care of identity theft cases is another way to maximize the money they're paid.

There are plenty of places to get your identity theft coverage. Should you have it? That seems like an easy question to answer...YES! And since you can protect your entire family with a dedicated team of attorneys and the resources of a billion dollar insurance company, $7.50 per month seems like the best deal around.

Talk to your local, professional agent today about adding on this important coverage for your family.

*Javelin Strategy and Research, 2009
** ITRC Aftermath Study, 2004

Sunday, March 28, 2010

What If My Insurance Company Doesn't Want To Pay My Claim?

You've had the same insurance company for years and you've never had a problem. Fortunately, you've also never had a claim. Now, you need help with a car accident or a hail storm or something else that should be covered under your insurance policy but you're being told you don't have any coverage and you're on your own for the damages. "What, no coverage!?! After paying for insurance all these years?!?" It can (and does) happen, but there might be some things you can do to get things paid for anyway. Here are a few tips in case your insurance company does not want to pay your claim:

1. Contact Your Local Agent. You personal agent represents the insurance company, but they work for you! The insurance company may write the paycheck, but the clients are where the pay comes from. No income, so call your local agent and get some personal help. Although an agent cannot change the company's rules, they often know the best way to get claims paid with the company they represent. They also have a relationship with the claims representatives that you don't have, and they can go to bat for you on why your claim should be paid.

2. Ask To See Your Policy. All insurance policies list what is - and what is not - covered under the policy. Sometimes a claims representative may read the policy one way, which you may be able to interpret differently. At the very least, if you look at the specific portion of your policy that the insurance company is using to deny your claim you may be able to find another way to present things to help get them paid for.

3. Talk To The Claims Manager. No one likes it when you ask to speak to their manager; claims representatives are no different. Sometimes just asking to speak to a claims manager will get an uncooperative claims representative to be more fair about things. If it does not, be ready to plead your case in a calm and professional way to the claims manager. The manager can often make adjustments or exceptions on a claim that allows you to get your damages taken care of.

4. Have Your Claim Taken To Claims Committee. If all else fails, ask that your claim be taken to the claims committee. Although this typically takes a week or two, it can often lead to claims being paid that have previously denied. A claims committee is typically made up of 4-5 people in different positions that may see a claim differently than the original claims representative. The committee will vote on your specific claim, similar to the way a jury votes in a trial. If the commitee finds in your favor then your claim will be paid regardless of what has previously happened.

What You Should NOT Do When Trying To Get Your Claim Paid. Although it can be difficult after hearing that your claim is not going to be paid, it is important to try and remain calm. Yelling or swearing at your claims rep usually does not get you anything but hung up on. Claims reps are people too, and they don't want to be screamed at any more than you do. Threatening to leave the company will usually do little to help your cause either. While the insurance company wants to keep you as a client, it is typically not factored into the decision on whether your claim is going to be covered. Threatening to sue is also not effective. Insurance companies have attorneys on staff that get paid to review claims for possible lawsuits, and handle any issues that may come up.

Your best bet when dealing with an insurance company that does not want to pay your claim is to get help from your local agent and have all of your facts and figures straight in case you need to dispute an insurance company's decision. Although it does not always feel like it, your insurance company really is on your side and wants to resolve things for you as quickly as possible. Remember, the company you're dealing with may be a corporate giant, but the claims rep you are talking to is just another person like you. Being nice can go a long way.

Thursday, March 11, 2010

Renting a Moving Truck - What Kind of Insurance You Need

     It's time to move; the boxes are packed, the truck is loaded and you're about to drive off into the sunset towards your new home. Then you wonder, what happens if I have an accident on the way? Who's responsible to fix the truck? What about all of your precious cargo in the back? You start to question "what kind of insurance do I need for this move?"

     There are 3 primary concerns when you are renting a truck to move your belongings from house 1 to house 2. They are:
  1. What if something happens to the truck?
  2. What if I crash into someone and hurt them?
  3. What about all my stuff in the back?
The size of the truck plays a part in the answer, as does the specific coverage provided by your insurance company, but in general here is what you should know.

What if something happens to the truck? Most insurance companies provide coverage to rental trucks, but ONLY if they are UNDER 10,000 pounds. Since you probably won't have your truck scale with you when you're looking for a rental, it is typically for the smallest (or 2 smallest) trucks available to rent. Any truck heavier than 10,000 pounds is considered a commercial vehicle and therefore it is typically not covered by your personal auto insurance policy. The way to get the coverage is to buy it from the rental company. It's an extra expense, but it's far cheaper than buying a new truck if you crash the rental!

What if I crash into someone? Unfortunately, answer number one usually applies to question number two as well. Liability coverage (the coverage in your policy that protects you if you are liable for other people's injury or property damage) will probably need to be purchased from the rental company if the truck you are using is heavier than 10,000 pounds. However, many insurance companies will have a provision that extends your liability coverage to other vehicles as a back up coverage. This means you may only need to buy the minimum coverage offered by the rental company if you carry good liability limits on your personal insurance policy (something that we've recommended repeatedly!)

What about all my stuff in the back? Most insurance companies will extend coverage from your property insurance to cover your personal belongings while in transit. HOWEVER, you must have an active property policy (insurance on either the place you are moving out of or the place you are moving in to) in order for there to be coverage. Also, some companies require that you add an endorsement to your policy. There may be a small extra charge for the endorsement, but it is a very small expense compared to replacing everything you own if something were to happen during your move.

Check with your local, professional agent for the specifics on your policy, and have a safe move!

Monday, March 1, 2010

Mary did the right thing for her family

We lost one of our clients a couple of days ago. We spoke to Mary’s daughter on Tuesday, 4 days before a passer-by spotted her car at the bottom of a ravine 250 feet below the road; she was worried because her mom had not come home the night before. On Saturday, 2/27/10, Mary's daughter was notified that her mother was ejected from the car after it went off the side of the road and was killed. I saw the story on the news and immediately thought back to my last meeting with Mary just one month ago. Our conversation about her job loss and her largest priority – taking care of her family – stuck with me. I never imagined it would be the last time we would speak.
Last month, we invited Mary into the office for her annual insurance review; something we had done with Mary for the past 9 years in a row. Mary never turned down our annual meeting and as always, she was pleasant and attentive as we reviewed her insurance program with her – car, renters and life insurance. Since our previous visit, Mary had lost her job and was living off of her unemployment benefits. She was using the time off to spend time with her brother who was terminally ill and care for her disabled son. Although she was anxious to get back to work, she was thankful for the time she had to spend with them both.
Mary only had one concern she brought up at our last meeting; she needed to reduce her insurance costs. She needed to make adjustments to make ends meet until she found a new job. We went over some options with her car and renters insurance. Then, we moved our attention to her life insurance but she did not want to discuss any changes to her life insurance plan. She was very adamant that she would not lower her life insurance coverage because that money was there to take care of her family in case something happened to her. Her permanently disabled son always needed help and if she was not there to give it, money would need to be available to make sure someone else would be. She would rather cancel one of her other policies (if it came to that) before lowering or cancelling her family’s life insurance. We were able to make enough tweaks for Mary to last another 6 – 12 months before we would need to consider more drastic alternatives. Hopefully, that would buy Mary enough time to find another job.

Mary did not make it another 6 - 12 months. Just one month after our meeting something happened that could have happened to anyone. Colorado’s icy roads took Mary’s life. Someone else will have to care for her disabled son. Someone else will have to look after her family. Fortunately, because of Mary’s commitment, her family’s financial loss will not equal their emotional loss. Mary did the right thing for her family and she set a great example for the rest of us. You will be missed, Mary.

Sunday, February 21, 2010

Colorado's New Registration Laws Could Cost You - Learn From My Mistake

Last week I posted to facebook while I was getting a ticket for expired tags. My tags were expired, so I did deserve the ticket (in my defense, I moved twice while my home was being built and did not get the renewal in the mail). That added $100 to my overall cost of renewing my registration. Fine, I can deal with that, but what happened when I got to the DMV to renew my tags caught me completely off guard.

Apparently a new law passed recently in the state of Colorado that charges a fine of $25 per month - 4 month maximum - for every month you wait to renew your tags past your normal renewal date. For me it was exactly 4 months. So, that added ANOTHER $100 to the overall cost of renewing my registration.

I tried the argument that I'm paying my extra $100 fee through the court system...but obviously that's NOT a valid argument. Instead, it seems that's just a bonus (for the state, not for me). Be careful out there and double check your license plate stickers for the renewal dates. Get them renewed on time, or face an extra $200 in costs. Oh, by the way, let's not forget that the cost to renew ALSO went up this year.

Glad I could do my part to support the great state of Colorado!

Tuesday, February 16, 2010

Do You Need GAP Insurance?

If you're ever going to buy a new car again and finance the purchase, you've got a GAP that you need to think about as you're pulling out of the lot. Everyone knows what happens when you buy a new car; by the time you get it home it's already worth 25% less. After a about 18 months it's lost about 50% of its value, but how much do you still owe? If you owe more than your new car is worth, that's your GAP. If you crash that car you could be faced with a large sum of money to cover the GAP that your insurance policy does not pay for.
Here's how it works: If you crash and your vehicle is a total loss, your insurance company will pay you what the car is WORTH, which may be very different than what you OWE.
Example: Joe trades in his 2005 Dodge for a 2010 Chevy. He still owes a little more on his Dodge than what it's worth, so the dealership adds the difference ($1,000) into the purchase price of the new loan. Joe's new car is going to cost him $25,000 + $1,000 from the Dodge, for a total of $26,000 + tax = $27,976. Joe pays $2,500 for his down payment, leaving him a balance of $25,476 to pay off the car. Twelve months later, Joe owes $21,655 when he has an accident and completely destroys his beloved Chevy. The insurance company does their job and writes Joe (the finance company, actually, since they still hold the title) a check for every penny the car is worth - $14,500 - deductible ($500) = $14,000. Who's responsible for the $7,000+ difference? You guessed it, Joe is.
The above example happens every single day. The insurance company has done their job and paid all they're required to pay - what the car is worth. Unfortunately, YOU are required to pay more than it's worth. YOU are required to pay what you owe!
How GAP insurance works: If you could picture yourself in Joe's situation, you need GAP insurance. As the name implies, it insures against any GAP you may have between what your car is worth and what you owe. So, in the above example, Joe's insurance company would have paid Joe the amount the car was worth PLUS the additional $7,000+ that he still owed. There are two places you can buy GAP insurance, through the dealership that sells you your new car, or though your insurance agent. BUT, one of the two will cost you 300% more!
Through the dealership: One of the biggest up sales at the dealership is GAP insurance. They charge a fortune for it (usually around $400) and then add it into your financing. Financing $400 over 5 years at 5.5% ends up costing you $470. That's not bad compared to paying the extra $7000 that Joe got stuck with, BUT it's a heck of a lot more than you need to pay. Instead of getting your GAP insurance through the dealership, get it from your local, professional insurance agent for a fraction of the cost.
Through your insurance company: GAP insurance can be added directly to your car insurance policy for around $12 per 6 months. It's the same coverage and the same protection, but the total cost over 5 years is $120. That's a savings of $350 just because of where you bought your GAP insurance. Make sure your insurance company knows if you are buying or leasing, as that can have an effect on the GAP protection.
Any time you can save $350 AND get the same protection, you've made a wise financial decision. Make sure you buy GAP insurance if you need it, but DON'T buy it from the dealerships or you'll be paying too much!

Tell us what you think. Have you bought GAP insurance through the dealership? Have you ever had to use it?

Saturday, January 30, 2010

If Your Home's Value Is Down, Should You Lower Your Home Insurance?

Home prices are falling pretty much everywhere, so chances are your home's value has gone down over the past year. If that's the case, should you lower your home insurance coverage to match the new value? After all, why would you want to insure your home for $250,000 if it's only worth $200,000 now?

How much you INSURE your home for has nothing to do with home much you can SELL your for. Most people make the mistake of thinking that insurance value and selling (or buying) price are the same thing, but they're not. Sometimes, like in a very volatile housing market (either rising or falling), the two values could be very, very different - and here's the reason why.

Your insurance company is NOT in the home buying business, they are in the home building business. In fact, they're not even in the building business; they're in the REbuilding business, which costs even more. If your home burned down tomorrow, your insurance company would not go looking to buy another house for you to move into. Instead, they would start over - on your existing lot - rebuilding your home that was just destroyed. They would build it back to the home you had, using all of today's building codes, material costs and labor rates - and chances are today's costs are higher than when your home was built the first time.

Unfortunately, while home prices have been falling, costs for building materials have been on the rise. In fact, lumber, steel and concrete have seen prices go UP just as fast as home prices have come DOWN! It's a double whammy for the insurance companies, and it's the real reason you should not lower your home insurance coverage to match your new - lower - home value.

Make sure you have enough insurance to rebuild - not re-buy - your home. If you don't know how much that is, meet with your local, professional agent for a replacement cost analysis. They should have software available to determine the proper amount of insurance for your specific home. A quick rule of thumb for costs (at the time I'm writing this) is approximately $110 per square foot above ground, and $60 per square foot below ground (your basement). Don't forget, you also need to include enough money for debris removal - knocking down your destroyed home and hauling it away.

Although it seems like an easy way to save money, lowering your home insurance amount could be extremely costly if your home is destroyed and you don't have enough insurance to rebuild.

Tuesday, January 19, 2010

Why Auto and Home Insurance Rates Will Go Up In 2010

The economy is in the tanks, your home is not worth what it was 5 years ago, unemployment is at all-time highs, AND your auto and home insurance will most likely get MORE expensive during 2010. I know you don't like hearing it, and I promise I don't like saying it, but it is true. Although it won't help with the rising costs, it may be helpful to know what's behind the price increases so that it doesn't feel so personal when you open your renewal paper work and write that bigger check. Also, knowing why things are going up will give you a better understanding of how to bring your insurance rates back down (or at least minimize the increase). There are three reasons you'll see higher prices this year, which are:

  1. Small profit margins are destroyed by big storms: I know this may be surprising (I'm using my sarcastic voice), but insurance companies are in business to make money. No shocker, I know, but what most people don't know is how extremely small an insurance company’s profit margin really is. If an insurance company can make it through the year with a 99% combined ratio - meaning they only spent 99 cents out of every dollar they brought in - then they are happy. If they finish a year and they've been able to keep a nickel out of every dollar, they're on top of the world. The industry is SO competitive and SO expensive, that most companies are literally striving to keep a couple of pennies in profit out of each dollar they bring in. So when a large storm - like the two hail storms Colorado saw during the summer of 2009 - adds another $25,000,000 in expenses for the year, the profit for the year is gone. When it happens repeatedly (there have been 4 major storms in Colorado over the past 2 years), insurance companies have no choice but to raise the prices to try to make a couple of pennies per dollar again.
  2. Rising material costs: If your home value is going down, why on earth would your home insurance go up this year? The reality is that insurance companies do not care what your home's value is on the open market. They are NOT in the business of buying and selling homes, they are in the business of repairing and rebuilding homes, and those costs have gone up tremendously over the past 24 months. Lumber, concrete, roofing materials, copper, wiring, etc. - all the materials used to repair and rebuild your home if it is damaged or destroyed costs 50% more to purchase today than it did a few years ago. Add in the changing codes and methods that must be followed during repairs (i.e. t-lock shingles are no longer used, so if you got a new roof this last year the old roof had to be completely torn down and the new shingles started from scratch) and you've got a more expensive environment to operate in if you are an insurance provider. The same situation holds true for your car repairs.
  3. Rising liability and medical costs: I know you are aware of how expensive medical costs have become over the past decade. Every year your health insurance costs more than the year before, and so do the doctor's visits and hospital stays, the ambulance rides and follow up care, and everything else associated with health care. The same holds true for legal costs. There are more lawsuits filed every year, and for larger amounts. Every second commercial on TV is for an attorney that can "get you a check" every time something goes wrong. All of the extra medical and legal expenses may go to your insurance companies, but they are paid by the consumers - me and you. If there is not enough money brought in to pay the rising costs AND keep a couple pennies per dollar for profit, then everyone has to pay more until there is. This problem has seen a dramatic increase over the past few years, meaning we will all continue to see our rates go up in 2010.
So now you know. It may seem like your higher costs are just a case of the greedy insurance companies trying to get you for everything you've got, but the truth is it's nothing personal. Most insurance companies have not made ANY profit over the past few years; in fact they've lost quite a bit. I'm not saying it's time to start feeling sorry for the insurance providers - we all know they'll make it through just fine - I'm just trying to set some realistic expectations for everyone in Colorado when it comes to your insurance prices.

Now for a bit of good news - there are some ways to fight off some of the rising costs, IF you're willing to make some adjustments to your insurance programs. Here are 3 quickies to get you started:
  1. Raise your deductibles: I know you've heard it before, but it really is one of the fastest, easiest ways to cut your insurance costs. Most insurance company’s rates are based on $1,000 deductibles, so every time you lower your deductible below $1,000, your price goes up.
  2. Double check your discounts: There are more discounts available today than ever before, including some for where you work and what kind of work you do. Have a discount discussion with your agent to review your program and make sure you're getting everything you deserve.
  3. Combine policies: Another oldie but goodie. Combining policies under one company has never made more sense than now. Insurance companies have new statistics that show the more policies you have with their company the less likely you are to file claims. The result, lower insurance rates and more rewards for consumers who package all their policies with one company.
Sit down with your local, professional agent today and discuss your options. An annual review is an opportunity to have your overall program reviewed and look for little tweaked that will help you find the best value - the proper coverage, at the best possible price.

Thursday, January 14, 2010

2009's Market Rally Is Turning You Into A Sucker

Every time you turn on the news, check the newspaper, or turn on your computer, one of the first things you hear is how much of a rally the stock market has had this month, quarter, or year. I can hear them on CNBC now, “the markets are on the rise…time to buy, buy, buy…forget about last year’s financial disaster, everyone smarter than a 5th grader is jumping back in and investing ALL their money!” Unfortunately, what most people DON’T realize is that even if the market does go up 25%-50% in a given year, if they don’t protect themselves from the downturns then they will never get ahead. In fact, chances are they’ll spend their retirement years working instead of…well, retiring (see “Retirees trading their golden years for the golden arches).

Here’s the math that you don’t see on the evening news or find in the Wall Street Journal. If you’re account lost 50% last year, it must make 100% JUST to recover and get you back to a break even. Most people think that if the market goes down 50% and then back up by 50%, they’ll be even again. Unfortunately, that is way off. Here is an example:

Account Value June, 2007: $100,000
Market Change June, 2008: -50%
Account Value June, 2008: $50,000
Market Change 2009: +50%
Account Value Dec, 2009 $75,000

How long does it take for the markets (or your account) to go up 100%? It certainly does not happen over the course of a year…or two…or five. If the market averages 10% per year, it will take 7 years to achieve 100% growth (the rule of 72. Look it up, it comes in handy). And what happens if 5 years into it, we see another drop of 25%-50%? Unless you guard against the market declines, you’ll never have enough money to retire. The market increases do nothing but lure suckers into investing all their hard-earned money into a system that statistically produces 80 losers for every 20 winners. I know what you’re thinking, YOU will be one of the 20 winners…o.k., if you say so. But let me ask you this, how has that worked for you so far? How has that worked for your parents, or your grandparents who are headed back into the job market because their retirement funds aren’t enough to pay the bills any more?

Don’t get caught up in the hype that the stock market is THE way – the ONLY way – to save for your retirement. It is ONE way to save and should be used for some of your savings, but only as one piece of your retirement puzzle – not EVERY piece! I know you’ve probably been listening to the Ramseys and Ormans of the world, but just because they say it on tv, that does not make it true. I’m not saying they are not smart people (don’t start bashing me yet, Ramseyites), I’m just saying they don’t know everything when it comes to investing.

If the stock market really isn’t the holy grail of retirement, but just one piece of your retirement puzzle, where else should you invest? The answer, a lot of places. Here’s a list of some places to consider. They may not be as sexy as the markets, but rich is better than sexy anyway when you’re turning 65 and leaving your job!
1. Municipal Bonds
2. Bond Funds
3. Investment Grade Life Insurance
4. Annuities
There are others, but these four are all good places to start. They are more defensive by nature, but still offer a lot of opportunity to earn good returns year in and year out to use when you retire. Besides, when your co-worker is crying in their cubicle next year because their account is down 25%, your 6% return for the year will be sounding pretty good. AND, you won’t have to sit around worrying about how your money is doing all the time. You could use that time to do other things, like enjoy life…or work to earn more money.
Talk to a local, professional advisor about your personal situation and find out what options are right for you. If you don’t yet have a professional you can talk to – or your’s decided to get out of the business after last year’s crash – give us a call. We’re always here to help.
What do you think? Are you diversifying and branching out to include other investment vehicles in your retirement plan? Leave your comments and stories below.

Sunday, January 10, 2010

Retirees Are Trading Their Golden Years For tThe Golden Arches

It seems like every time I take my 10-year-old to McDonalds lately, I’m giving my order to someone who probably hangs out with my grandparents. In fact, I’m guessing most of them ARE grandparents. I started thinking that maybe they knew something I didn’t about the best place to work – a free uniform, discounts on quarter pounders, an extra order of McNuggets – but then I realized that these retirees were working not because they wanted to, but because they HAD to. After all, if you could choose between traveling, playing golf and enjoying your golden years or standing behind the cash register at the golden arches…well, the choice would have already been made.
Unfortunately, retirees are heading back into the workforce – a result of watching their nest egg lose 25 – 50% of its value over the past few years. They were all convinced by the financial gurus that the best way to retire was to spend 30 years contributing to a plan that would be heavily taxed and prone to losing money for 80% of the participants. They listened to the Ramsey’s and the Orman’s shout lies about unrealistic returns and believed the hype that “there is no other way!” when it comes to preparing for the day you (hopefully) stop working (for good) and start living your dreams. The result, hundreds of thousands of baby boomers frantically trying to find a way to recover, and even more retirees heading back to work – finding that the competition is so stiff the only place they can easily find employment is somewhere that asks “would you like fries with that?”

For retirees, it’s too late. The damage is done and they’ll be recovering for the rest of their lives. For baby boomers, the time is now to take big steps to secure your future. Continuing on with the status quo will get you to the same place as today’s retirees. Waiting around for the market to recover is NOT a plan, it’s insanity (insanity – doing the same thing and expecting different results). Do the math; if your account lost 50% in last year’s sell off (ie. your balance went from $100,000 down to $50,000), the market has to go up by 100% just for you to BREAK EVEN! The average time it takes for the market to go up 100% is 7 – 10 years!! The average recovery time (a flat market) after a recession is 16 years! Are you starting to see the problem?

Fact – the average mutual fund investor has actually lost one percent per year, adjusted for inflation.
Fact – 80% of all investment advisors and mutual funds do WORSE than the overall market every year.

I am an advisor, so the truth hurts…but that does not make it any less true. Advisors do their best to help, but the numbers don't lie. I’m sure you’re thinking you’ll be one of the 20% whose account continues to rise – beating the market and building a fortune for your later years. That’s what today’s retirees thought as well, convinced of this lie every time they turned on CNBC or talk radio. If they’ve got you convinced as well, please keep doing what you’ve always done – the world will always need someone to put down another batch of fries for the lunch rush.

Thirty-somethings and forty-somethings need to start planning for their retirement in different ways. They need to shift some of their retirement savings into accounts that don’t fluctuate with the market. Another lie out there in the media is that the stock market averages 10-12% per year…NO WAY! The actual inflation-adjusted, long-term average is 6%, and it comes with all the stress of the constant roller coaster ride and the knowledge that the year you decide to retire could be another year the market drops and you lose 1/2 of your money.

The other problem retirees are facing are ever-increasing taxes. Convinced that their 401(K)’s were the best place for their retirement savings, they built up as much pre-tax savings as they possibly could. They were told (as you are today) that it is better to postpone taxes until retirement because you’ll be earning less and be in a lower tax bracket. There are TWO problems with this line of thinking:

1. No one is in a lower tax bracket now than they were 20-30 years ago because taxes have gone UP, and continue to go up. We’re in store for more tax increases in the next few years – a necessity to pay for the increased government spending and bailouts. Seniors who were in a 15% net tax bracket 20 years ago no longer have the tax breaks they did when they were younger (children at home, mortgage interest, etc, and are paying 25-30% in taxes today.

2. Who wants to PLAN on being in a lower tax bracket when you retire? Think about it, that means you are planning on having less money then you do now. Do you feel like you have too much right now? If not, why would you want to PLAN on having less in the future?

There has never been a better time to sit down with an advisor who is focused on tax-free, risk-free planning and evaluate the road you are headed down to determine where you’ll be when it’s finally time to retire. A Chinese proverb states, “no matter how far down the path you discover you are going the wrong direction…TURN AROUND! Continuing will only put you farther away from your desired destination.”

Tuesday, January 5, 2010

Covered In Raw Sewage, I Chose Not To File A Claim

My new year's day started out with a bang...literally! At noon I was standing on top of my sewage system (the system is required because I live on the side of a hill and have to pump the sewage to the top) wondering why it was not working. Unfortunately, that is when it blew up - showering 100+ gallons of raw sewage on my basement ceiling...walls...and me! I carry the proper coverage on my insurance to pay for clean up as well as repairs, but instead of filing a claim I spent the next 4 hours cleaning and sterilizing and then covered the $2,000 bill myself, instead of filing a claim.

Why would I choose NOT to file a claim and take on the cleanup and plumbing bills myself?
That's a good question - one I asked myself multiple times during the ordeal! The answer has to do with what your home insurance is really designed for, and what happens if you have to use it too often. Here's the quick run down:

  1. What home insurance is designed for: Home owner's insurance was originally designed to cover the large, catastrophic events that could happen to a home - a fire, tornado, etc. - where you pretty much lost your home and had no place to live. That would have a devastating effect that most families would not be able to recover from. Over the years, people's IDEA of what their home insurance should pay for has changed - broken windows, small thefts, new roofs, etc. This new way of thinking has caused most people's home insurance rates to rise more than 100% over the past decade alone, because as insurance companies experience more claims EVERYONE shares the cost of those claims through rate increases. Also, every person who files a claim pays an extra charge - a penalty for filing the claim (no matter whose fault the claim or what kind of claim), and they see even larger price increases for at least the next 3 years. 
  2. What happens if you use your home insurance to often: Most insurance companies allow for 2 claims every 3 years (although it is becoming more common for companies to allow for 2 claims every 5-6 years). If you go over your company's claim limit your policy will most likely be non-renewed. If you find yourself without insurance due to the amount of claims you have filed, you will probably find you are forced to pay three or four times the normal rates to get a new policy - IF YOU CAN FIND ONE AT ALL! I've seen clients forced to go to a state issued policy that offers minimal coverage and still costs four times as much because no company would offer them a policy due to their claims history.
I've seen it happen more times than I can count, a client chooses to file a small claim (thinking it will be years before anything else happens) only to be hit with something major later on the same year. The result - the insurance company chooses to cancel the policy at the next renewal, forcing the client into a much higher priced high-risk policy. Had I wanted, I could have saved myself the cleanup (my policy would pay for it) and cut my cost down to $1,000 (my deductible), but I chose to save my policy just in case it is really needed for something major.

I recently lost a great client because they chose to file 3 small claims in 18 months for a total of $2,500 in total payouts by their company. The result - their home insurance went up to over $5,000 per year for a policy with a high-risk provider, AND the new policy specifically excluded the type of loss that they had repeatedly filed on their old policy!

Before you file a claim, PLEASE consult your local, professional agent about the pro's and cons of the claim. Insurance is there if you need it, but if your insurance company thinks you are abusing the system it won't be long before you find yourself with no insurance at all!

Have you ever chosen NOT to file a claim? Let us know about your experience, we'd love to hear from you!