Don’t Let a Bad Day Turn Into a Bad Life!

April 16, 2016

For nearly 10 years I worked as a District Manager for a national multi-line insurance company recruiting, training and educating agents how to best protect their client’s assets and income. At any given time I had 40-50 agents that required constant training and attention.

On a particular week I was hosting a large group of agents and customer service representatives at a local Inland Empire restaurant. With the group winding down their meal, I went to take care of the bill. When I got to the counter, the first thing the cashier said to me was, “Boy, I wish I would’ve had better insurance!” I was taken back not realizing she knew who we were. I immediately asked her what she was referring to and then she told me this story.

About six years prior, her teenage daughter got into an at-fault auto accident where she pulled out in front of another vehicle causing serious injuries to the other driver. Unfortunately, the mother had an auto policy from a generic insurance company with insufficient coverage. With an agent not trained in asset protection and no doubt trying to save her a buck, her auto policy had minimum policy limits of only $15,000 bodily injury per person, and $30,000 per accident and $5,000 in coverage for property damage. By the way, the average plaintiff verdict for a vehicle negligence case in CA in 2002 was $536,188 and that was over 10 years ago (Source: Trials Digest Publishing Inc.).

She went on to share that the damages assessed were far higher than her policy limits and so her carrier paid policy limits and she was left with years of wage garnishment working a second job to pay off the court settlement. Why? Without the assets to immediately pay the judgment, the court garnished her wages to pay the lien. Can you imagine? Talk about a bad day turning into a bad life!

She lamented that she was not educated on the inter-workings of an auto policy, didn’t understand the importance of asset protection and didn’t have an agent willing to take the time to educate her. Like most consumers she viewed her auto and home policy as a requirement of the state or financial institution. This is as a sad story, but unfortunately I am privy to numerous cases over the years with the same devastating results. I recall one case where a retiree couple was forced to liquidate significant retirement assets to pay a court settlement.

I have held a property and casualty insurance license in the state for years. Incidentally, very few financial advisors have property and casualty expertise. This experience as a critical added element to helping my pre-retiree and senior clients protect and grow their wealth.

Americans are obsessed with building their castle, but what about the moat around the castle? All it takes is a major car accident, a house fire, premature death, a lengthy disability, a long-term illness or lawsuit to put one’s castle at risk. This is why protecting the castle is as important as building it.

Unfortunately, there are many who just pay the auto insurance bill, never really looking at the policy. Auto insurance agents are supposed to regularly review coverage limits with their clients, but most do not. I have assembled a brokerage of auto and home carriers to provide just the right policy design for my clients. In most cases, we are able to increase coverage and decrease cost.

Just last week I had it happen again. Upon reviewing my client’s auto policies I found several serious problems. In the end, we increased their coverage by three fold, to more adequately protect their assets, and dropped the annual premium by $84. We did this by understanding the dynamics of the auto policy coupled with an in-depth understanding of the client’s financial life.

Here are six important areas to consider when reviewing an auto policy. First, set coverage to cover the risk. A big castle requires a bigger moat, while a smaller castle can get by with lower coverage limits. Most all errors are made here! Second, don’t forget to add coverage to protect against wage garnishment. Third, be watchful for lurking inconsistent auto liability limits. Why would you cover the other guy for more than you would cover yourself? Fourth, beware of named insured policies. Fifth, consider higher deductibles for efficiency. Finally, where appropriate, consider an umbrella policy.

Get on the road to financial peace making sure your moat is sufficient.