Tuesday, August 27, 2013

Is That Considered A Flood?

With all of the heavy, heavy rains we've been getting across the city of Colorado Springs and surrounding areas (and the flooding that's been coming along with it), it seems like a good idea to make sure you know what is and is not considered a flood as well as what is and is not covered under most home insurance policies when it comes to flood damage.

First, what is considered a flood? The dictionary defines "flood" as a rising and overflowing of a body of water onto normally dry land. For insurance purposes however, the word "rising" is the key to distinguishing flood damage from water damage. Generally, damage caused by natural flowing water that comes from the sky OR water that has been on the ground at some point before damaging your home is considered to be flood damage. A handful of examples of flood damage include:
  1. A nearby river overflows its banks and washes into your home
  2. A heavy rain seeps into your basement because the soil can't absorb the water quickly enough
  3. A heavy rain or flash flood causes the hill behind your house to collapse into a mud slide that oozes into your home
  4. Your home is located at the bottom of a hill or in an area that water runs through, filling your window wells and damaging your basement
Photo examples of what insurance considers to be a flood include:

The above pictures are from a recent storm here in Colorado Springs and any damage caused by the running water and heavy rain would NOT be covered under your home insurance policy. The last photo was from the same storm, but left a few feet of hail instead of running water. However, for insurance purposes it could still be considered flooding if the hail filled up your window wells and then melted and seeped into your basement, causing damage. In order to be covered for these types of events, you must carry flood insurance.
Flood insurance can be obtained through your local agent, but it is a separate policy from your home insurance and, very important to note, has a 30 day waiting period for coverage to begin UNLESS the policy is required for a loan closing.
The good news about flood insurance is that it is relatively inexpensive if you are not in a flood zone, ranging from $129 - $458 per year for a home owner, depending on the amount of coverage you need and whether or not you have a basement.
If you live near a burn area, there is an increased likelihood of water runoff and water damage because the ground is not able to absorb the rainfall and you may need to consider a flood insurance policy as an extra layer of protection for your home. If your home is located in an area that has a lot of runoff passing through your yard or if you are near a gully or stream, you too may want to purchase a small flood insurance policy for the peace of mind of knowing you would have some assistance if the waters get high again.
To talk about your particular home and situation and find out if you need this additional coverage, contact your local, professional insurance advisor who understands the unique risks that Colorado Springs, Manitou Springs and surrounding areas are facing right now. Hopefully you'll never be impacted by flood waters, but if you are, it's important to know that you have the right kind of coverage to protect your home and personal property.

Monday, July 8, 2013

What the bottom of the Grand Canyon taught me about investing for retirement. Part 1

My dad and I have been talking about rafting through the Grand Canyon for years. In June, we finally
had the opportunity to spend seven days (along with my son, Christian) traveling 188 miles down the Colorado River through the heart of the canyon. WOW, what an adventure! Rapids, waterfalls, slot canyons, hikes, camping...it was 7 full days of pure amazement. On top of all of the fun we had (including two opportunities to do some cliff jumping - check out the photos on Facebook.com/MyInsuranceGuys) I was also reminded of quite a few lessons that relate back to the world outside of the canyon. Specifically, some do's and dont's for retirement planning.

The Grand Canyon is a world of extremes. The air temperature was 105º but the water temperature
was only 47º. One minute you’d be hot as could be begging for a rapid while the next minute you were freezing your butt off and begging for the sun. However, if you averaged the temperatures out and sat in the sun while you were soaking wet, it felt pretty darn good because you were in “the sweet spot”. Not too hot and not too cold, but right in the middle. You should look for that “sweet spot” in your retirement accounts too. You may be tempted to swing for the fences with your retirement investments in order to catch a big return, but more often than not you catch not only a part of a big upswing, but also part of a big downswing as well. Over time, investment portfolios with real big swings up and down always perform worse than those with a nice, consistent average in the sweet spot. Try to find the middle ground and build a portfolio that avoids the extremes. Not only do you typically get better results, you’re usually a lot more comfortable too!

Another big lesson learned was the art of “sucking rubber.” As we would approach a mega rapid (the
biggest one we faced had us going straight up a 15 foot wall of water) our guide would yell out for us to “suck rubber”, which was our cue to get low (low enough to suck rubber), hold on tight and brace for impact against the impending wall of water. The lower you got (the more rubber you sucked) the better the chances of the wave going over your head instead of hitting you in the chest and knocking you off of the raft. There are certain events in in your journey towards retirement that require a little bit of “sucking rubber” in order to make it through relatively unscathed. Sometimes you can see them coming from a mile away and prepare for them. Other times, having a guide that can tell you when to suck rubber can save your retirement account and keep it safely on the raft and heading in the right direction. Make sure you are paying enough attention to the economy and the financial indicators to know when a big rapid is coming. Or, make sure you have a financial guide who can see the rapids that you do not and give you your cue for when it's time to suck rubber.

The amount of beauty in the canyon was unbelievable. There were hidden waterfalls and oasis
around every corner - if you knew where to look. There were plenty of times our guide would pull up to a rock in the middle of a rapid, tie off ...and then head off towards what usually looked like nothing. But then we would duck around a rock wall or up a little canyon and find hidden swimming holes and lush gardens. I was amazed that, in the middle of the dessert, there was an amazing amount of water, flowers and trees IF you knew where to look. We would have passed them by, never having known they were there without our guide, who knew every nook and cranny of the river and exactly where to stop.

When it comes to investing for your retirement and making sure you have enough money at the end of the trip, getting there is kind of like traveling the 188 miles down the canyon. There will be some big rapids that you need to “suck rubber” through (like the crash of 2007) and there will be plenty of hidden waterfalls and oasis (great investment strategies) that you may not see if you’re traveling down a river you've never been on. People who use a guide are more prepared for their retirement, typically have more money in their retirement accounts and know how much they need to save in order to reach their retirement goals. There are a lot of reasons people try to handle their own retirement plans, but the bottom line is you’ll do much better if you have a little help. It’s never too late (or too early) to make sure you’re doing the right things for your retirement account, and it's always the right time to ask for a little help.

Stay tuned for part 2 - "The right equipment"

Tuesday, June 11, 2013

The Challenge Of Zombie Retirement Planning

I've been talking lately about "knowing your retirement number", that magic number or amount of money you'll need in order to retire (and stay retired) with the kind of lifestyle you'd like to maintain. It's important to know your number so that you know where you need to be (financially) when you get to retirement age. Knowing where you need to be allows you to create a road map to get there and it is one of the first steps in retirement planning. Everyone's number is different and is based on a lot of different factors. A few of which, as you'll see, make retirement planning pretty tough if you're a zombie!

Aside form the obvious challenges of working with zombies - they try to eat you at every
meeting, they don't answer your questions, they're constantly wandering off, etc - there are also a lot of planning challenges that come into play. For example, one of the biggest factors in your retirement number is longevity, or how long you expect to live after retirement. If, for example, you know you only have one year to live then you can spend every penny you've saved during that year without worrying about running out of money the next year. However, if you expect to live 30 years after retirement, your retirement number will need to be much bigger and you'll need to budget your spending because the money has to last much longer.

Hence the first problem of zombie retirement planning, in theory a zombie could go on existing forever! While the living can expect an average of 25 - 30 years of life after retirement, the walking dead may need to plan for double or triple that amount of years. Very few people have factored in their longevity and fewer still have saved enough money to live their pre-retirement lifestyle for 30 years. Imagine how difficult it is to convince a zombie to plan for 60 years!

Compounding the problem is the fact that life expectancy is only an average and about half of all the members of a certain age group will live past their life expectancy. So if your retirement plan is based on using up all of your income by the time you reach your average life expectancy, you have a 50 percent chance of outliving your income.

Second, life expectancy is not a constant, but rather a moving target. If you've reached 65 already, your life expectancy has already increased. After all, you've survived many people in your age group who died before you. Your new life expectancy based on your current age is called your longevity, and longevity is a more accurate assumption on which to base your retirement income planning.

Consider this: Americans who reached age 65 in 2011 are projected to live another 21 years to age 86, on average. If these same Americans reach age 86, their life expectancy would extend to age 93.

And here's one final thing to keep in mind: While a 60-year old man today has a 20 percent probability of reaching 95 and a 60-year-old woman has a 30 percent chance, there is a 40 percent chance that at least one member of a married couple at the same age will live until 95. Retiring couples need to carefully consider this when planning for retirement.

Making retirement income projections should involve balancing the risk of drawing down your income too quickly and being left with little to live on in your 80s or 90s, against spending your income too slowly and needlessly crimping your retirement standard of living.

It's natural not to want to consider your own mortality. Many workers planning for retirement, and even those on the cusp of retiring, see life after work as a golden time stretching into a hazy horizon. It can indeed be a wonderful second act, but that will depend on your taking an honest look at how far away that horizon really is.

You won't live forever. But you may live longer than you expect. Used correctly, life expectancy and longevity can be powerful planning tools that can help provide a truer picture of what you have to do to make your retirement years both comfortable and secure.

Fortunately if you're reading this, you're still among the living and don't have the extra challenges faced by the undead. Planning your retirement and thinking about your longevity may seem scarier than a night out with a crowd of walkers, but knowing your retirement number and working on a plan to get there can help put your mind at ease and insure the retirement of your dreams. If you don't yet know your number, you can access 3 great retirement calculators right now at https://pyz92550.infusionsoft.com/app/form/know-your-number. Or, for your very own personalized Retirement Income Replacement Analysis, email me at r.edgin@weinsurecolorado.com and request the Retirement Questionnaire. I'll email it to you at no charge.

Monday, February 4, 2013

Broken Legs, Skier's Liability, And Your Home Insurance Policy

Ski season is in full effect, and Colorado ski resorts are finally getting some much needed snow. My son and I decided to take advantage of the fresh powder and headed west, along with what seemed to be half of the residents of Colorado, for a day of fun in the snow. But unfortunately, I was involved in a very serious collision with a 6 year old boy that resulted in a broken leg and a trip to the hospital...for the little boy.

While skiing down an advanced run, I looked up the mountain to see if it was safe to make my way across. As I looked up, I saw Colton (named changed) coming at me at a very high rate of speed. Colton wasn't out of control, but he was going too fast and was not able to turn very well yet (which is why he was coming straight down the mountain). There was nowhere for me to go so I braced for impact and did my best to catch Colton as we collided in order to, hopefully, prevent serious injuries. Fortunately, Colton and I were both wearing helmets and, fortunately, I was able to wrap Colton up in my arms and fall in a way that put most of the impact on me. Unfortunately, Colton's leg landed under me and, as we slid down the slope, his leg was broken.

More than 55 million people per year hit the slopes in the United States, and every year, there are about 135,000 serious injuries and 40 deaths. What do you do if you find yourself tangled up with another skier who decides you were at fault for their injuries? Where can you turn to help you with legal and medical bills that you may be responsible for? You may be able to get some help from your home insurance!

Your home insurance policy includes medical payments to others and personal liability coverage which protects you and members of your family that are living with you for injuries to others that you may be responsible for, even if the injuries do not happen on your property! Your home insurance can help cover the costs of legal fees, medical bills, work loss and pain and suffering if you are liable for someone else's injuries in an accident.  There are some limitations, coverage does not extend to intentional acts, accicdents covered by auto (or other vehicle) insurance, or claims covered by worker's comp insurance. You are also bound by the limits on your individual policy and any exclusions that your insurance company may have listed, however, ski accidents are typically not excluded.

Make sure you carry high enough liability limits to protect your assets and future earnings. You don't want to find yourself at the wrong end of a lawsuit and have your insurance company tell you that there isn't enough coverage to pay for everything and the rest will be coming out of your pocket! Increase your medical coverage to $5,000 and your liability coverage to $500,000 to be on the safe side. If you do have to file a medical or liability claim, you will typically not be responsible for your deductible as deductibles don't apply to liability claims.

Hopefully, you never find yourself being sued or facing a situation where you are responsible for someone else's injuries. Luckily, I wasn't injured in my ski collision. Colton ran into me and suffered a broken leg, but things could have been much, much worse. If you're going skiing, play it safe and make sure you follow the National Ski Patrol's skier code of conduct.

  • Always stay in control, and be able to stop or avoid other people or objects.
  • People ahead of you have the right of way. It is your responsibility to avoid them.
  • You must not stop where you obstruct a trail, or are not visible from above.
  • Whenever starting downhill or merging into a trail, look uphill and yield to others.
  • Always use devices to help prevent runaway equipment.
  • Observe all posted signs and warnings.
  • Keep off closed trails and out of closed areas.
  • Prior to using any lift, you must have the knowledge and ability to load, ride and unload safely.