Archive for the ‘Property’ Category

How to Interview a Planner

Wednesday, February 29th, 2012

 

Staying away from illegal interview questions is vital according to a recent CBS News blog. Do not screen people for: race, color, sex, religion, national origin, birthplace, age, marriage and disability status. You can, however, “re-work some legal alternatives”.

 

If you want to know how old someone is, ask them if they’re “over the age of 18”. If you want to know if they have kids, ask them if they’re “willing to travel”. That last one is interesting, because it naturally assumes people with kids don’t want to travel – who does, really? (For work, that is.)

 

Keeping these guidelines in mind, what should you ask the person you may ultimately entrust with your personal and confidential information?

 

Query Their Professional Age

 

You do want to know how long this person has been working in the business. Short of “carding” them, ask them to tell you about their work experience. How long have they worked with the carrier(s) and brokerage house(s) they represent? When did they get their accreditation(s) and how long have they held each of their industry licenses?

 

A word of caution: If you run into someone who advertises or speaks in terms of “big returns”, “no risk”, or “guaranteed appreciation”, run for the hills! The SEC and a slew of other governing agencies haven’t caught up with them yet.

 

The financial services industry is strictly regulated with regard to the way financial professionals are allowed to talk about their services. This pertains to anyone handling: stock/bond/commodity trades, life insurance, annuities, retirement accounts and the like.

 

Get a Complete Service List

 

When you hire a professional advisor, look for one who can shed light on your big picture. Those who handle life, health and property insurance, in addition to financial services will be able to serve your interests best with a complete profile in hand.

 

The key theme here is to avoid the pitfalls of mixing apples and oranges. The last thing you want to do is spend more than you have to with cross over coverage or waste money on products you don’t really need. Working your complete profile will also avoid the demise of ineffective protection and planning.

 

Fee or Free?

 

Many planners market themselves on the premise that charging fees guarantees honest service. They say this because charging you like an attorney demonstrates they are not beholden to any one service provider.

 

Working with a Planner/Advisor that is a Broker (who won’t charge you fees upfront) can also provide objective placement on your behalf. Professional planners who are brokers contract with multiple insurance carriers and investment houses that pay them commission on orders they place. (Keep that in mind if you opt to work with a fee based planner – use it to negotiate cheaper billing rates.)

 

On the opposite side of the spectrum are “captive agents” – those who work for (and are beholden to) a single carrier or investment house. While they do not charge fees for their services they are employees.

 

In recent years some insurance carriers such as, Allstate, have branched into financial product lines. To date, however, they do not provide one advisor to serve their customers’ multiple needs. In this scenario, finding the best advisor for your needs is left to chance.

 

Take Away

 

Look for someone with professional designations licensed in multiple product lines. Ask them to share their experience with you and request a complete list of services.

 

Work freely with a Broker Advisor. Planners who are brokers have access to numerous companies which gives them an edge on finding the best solutions for their clients.

 

If your Cousin Joey is a captive agent with State Farm, don’t shy away from working with a professional planner. Just make sure to let your advisor know about everything you have in place.

 

Kurt Rusch  CLU, ChFC

 

Get a Competitve Edge on Auto Insurance

Wednesday, December 7th, 2011


I recently shared an article I read on “12 Tips to Saving Money on Auto Insurance” with my wife; her first response was, “How much can you save if you make these changes?” Half of any insurance equation is always cost; unfortunately, the answer is more convoluted.

 

Since there are so many factors affecting the pricing of each and every type of insurance, the cumulative effect on changing one or more of the rating factors will vary accordingly. Overall, there is no set formula or even “rule of thumb” that insurance companies have for setting rates based on different risk factors. Every company will assign rates based on actuarial analysis of their current policy holders.

 

There are numerous possible discounts credited by most if not all companies today. Because urban drivers typically pay higher premiums than rural drivers, cost savings will be easier to accumulate for an urban driver. Here are the top things to consider and/or modify when seeking lower premiums:

 

 

Vehicle Choice

 

A major factor in determining rates for auto insurance is the type of vehicle being insured.

 

Obviously, a high performance car will typically be more prohibitive to insure than a family sedan. You may also be surprised to know that some relatively inexpensive autos are much more costly to insure than one may think because their repair costs are relatively high.  If you are looking to buy a car and insurance premiums are a major concern, contact a broker to determine which vehicles will have a lower premium to insure.

 

Clean Record 

 

One of the most important insurance rating factors is your driving record including tickets, accidents and any other claims filed. In general, the less activity, the better the rates.

 

Miles & Usage

 

There are separate rating categories for usage and annual miles driven; if you use your vehicle for  business the premium will be more substantial than if it is being used to run errands on the weekend. The same holds true for the annual mileage driven. The more you drive, the higher the premium.

 

Raise the Roof

 

Consider raising your deductible (the amount you would pay before the insurance pays the balance of a claim). Doing this can be a huge money saving plan, however, review the savings potential before blindly implementing a change – often times raising a deductible by an additional $500 will result in a minute change in premium. Determine whether the cost savings warrants the increased exposure.

 

Good Credit

 

Your credit rating can affect your premium; this is a rating factor that is not typically known to insureds. Most companies are now using credit ratings as one of the determining factors in rating contracts.

 

Location, Location, Location

 

Are you geographically undesirable when it comes to auto insurance? Location plays a huge part when determining premiums for insurance. Actuarially, companies have found that the congestion in urban areas lead to a statistically higher probability of having a claim.

 

Drop the Baggage

 

Get rid of unnecessary coverage. A good example of this would be to drop coverage on an older vehicle. As your vehicle declines in value, the amount that an insurance company will give you in the event of a total loss will also decrease accordingly. At a certain point in time, it becomes illogical to retain comprehensive and collision coverage on the vehicle.  

 

Crime Busting

 

Install anti-theft devices; in some instances the savings in premium will validate the initial outlay of cash to install such a device. Even if this takes a couple of years, it may be a wise move financially.

 

Combine & Conquer

 

Insurance companies typically will reward you for loyalty. They will give discounts for insuring all of your vehicles on one policy. They will also offer discounts if you have other insurance with their company such as homeowners, umbrella, and/or life insurance coverage.

 

Other Considerations

 

There are many company-specific discounts that may also be available. Examples of these would be discounts for college-degreed individuals, good students, military, employees of specific companies, and specific occupations.

 

For Illinois Seniors, there is a defensive driving program called 55 and Alive which teaches aging drivers how to adjust their driving to compensate for slowing reaction times etc.  Many senior centers offer these programs and taking these courses can help senior rated drivers.

 

Wrap Up

 

There is no one size fits all in the auto insurance market. Due to the number of companies doing business in this market, it is a must to shop around. If nothing else, it gives you a chance to review whether your existing limits remain adequate or whether they should be adjusted to better protect you and your family.

 

Shopping around will also help you determine whether or not your current insurer is still providing a good value for you. Are you truly receiving great value for the premium dollars that are being expended?

 

Kurt Rusch  CLU, ChFC

 

Online Auto Insurance

Thursday, September 15th, 2011

 

Do-It-Yourself is big online today. Consumers like to pick out what they want and get quotes from the anonymity of their own computers. Except, of course, for those annoying vendors who call incessantly once you hit “submit”, people can shop incognito most of the time.

 

The insurance industry offers equal accessibility. Who doesn’t like the thought of not having to talk to the Boogeyman (aka insurance agent) when looking for a good deal online? There is no doubt that D-I-Y is convenient, but getting a good deal does not translate to getting good coverage in the insurance biz. More often than not, it’s more like D-Y-I: Do Yourself In.

 

Cyber Gap

 

The most common insurance market being hawked online by companies today is automobile insurance. My personal observation: consumers really don’t understand what they are purchasing. For example, let’s take a look at Joe Blow. He has a $400,000 home and just switched his auto insurance (online) to save $400 a year keeping the same deductible.

 

Joe saved premium by dropping the liability coverage on his three vehicles from $250,000/$500,000/$100,000 to the state minimum: $20,000/$40,000/$15,000 (in Illinois). What Joe did in saving that extra $400 per year was expose himself, his paychecks, savings and home.

 

Many people don’t understand the significance of this switch. When Joe switched to minimum liability coverage, in reality he agreed to the following if at fault in an accident:

 

1. He will be personally responsible for any injuries caused over $20,000 per person.

 

2. He will be personally responsible for any personal injuries totaling over $40,000 for all passengers in the other vehicle.

 

3. He will be personally responsible for any property damage over $15,000.

 

The shortcomings here are obvious; medical costs are exorbitant and low end new cars are selling for more than $15,000 these days. That $400 a year won’t do much towards replacing property or paying doctors’ bills. Add to this what could happen to Joe in the worst case scenario: causing someone else’s death. A wrongful death lawsuit stemming from an auto accident could have you working for the decedent’s family for the rest of your life.

 

Lesson Learned

 

Simply put, when consumers opt for the lowest price with disregard for the very benefits they’re buying, they open themselves up to a plethora of problems down the road.

 

Tread very carefully before you cyber drive insurance. Be armed with the knowledge of what is and is not covered and do your homework before you make a decision – don’t jeopardize your lifestyle.

 

Alternatively, work with an insurance broker, (yes, I am one), who has access to numerous carriers to draw from in finding coverage appropriate to your cost and benefit standpoint.

 

Kurt Rusch  CLU, ChFC

Protection 101

Tuesday, February 15th, 2011

Today marks the first day of a new job duty for me, blogging. (In my wildest imagination never did I think I would become a blogger). Naturally, my first challenge was to decide what to write about. When it comes to basic financial planning, what has the most impact on most people?

The answer is property insurance. Glamorous, it’s not, but protection of our automobiles, homes (whether personal residence, seasonally lived in, or rented out), boats, recreational vehicles, and additional liability policies, such as umbrella policies, is a core element in having a financially secure foundation.

Premium vs. Protection When I review property protection policies with clients, it is acutely evident that most people have no idea what exactly is or is not covered by their policies. My observations are that people typically know their premium and deductible and that’s about it. While having a good grip on expense is good thing, a lack of understanding for proper coverage can actually put your financial future at risk for a couple of dollars in saved premium.

But here’s the good news, in many cases, rearranging where the premium dollars are allocated, can ensure more appropriate coverage for no additional premium outlay. This is why it is so important to  discuss what the best options are for you, your business and/or your family with a licensed professional. Steer clear of  do-it-yourself online issue and toll free numbers to save a buck; they are void of the personalization needed to get the best coverage at the best price.

Auto Liability Some of the most common misunderstood concepts relating to auto insurance are the liability amounts. What people should have to be well covered and what is mandated by the government are two drastically different amounts. The State of Illinois mandates minimum bodily injury liability coverage of $20,000 per person and $40,000 per accident, and $15,000 for property damage – this is where the problem starts.

Unfortunately, government mandated amounts such as these, won’t go very far in the real world. How many people have you known who were hospitalized that left with a bill of less than $20,000? How often do you think that totaled cars would be worth more than $15,000? Both of these situations illustrate why it is so important to really understand the coverage you pay for before you need it.

Consider further, what happens if you get into an at fault accident without proper liability coverage. The other party can come after you for the amount over and above the covered amount. If you don’t have the ability to pay, they can seize your home, other assets and/or have your wages garnished. Is this the type of exposure you really want to put yourself or your family through to save a few bucks?

Water Claims A common item neglected in the Chicago area has to do with homeowners insurance; specifically, water claims. There is a difference between flood insurance and water backup insurance. Flood insurance covers damage relating to a body of water leaving its banks and causing damage to your property. This is a separate policy that would be available for purchase if you live in a floodplain. Typically, if you have a mortgage and live in a floodplain, the mortgage company will require this coverage be in place.

In contrast, water backup coverage describes a claim arising from water backing up through the plumbing system in your home. This coverage typically comes in the form of a rider that can be added to an existing homeowner’s policy for an additional fee. In the absence of this optional rider, there is no coverage on a typical homeowner’s policy for any water claim. The exception to this statement is if the homeowner has purchased an all perils policy.

Premium costs, auto liability and water claims are just a couple examples of how underestimating and misunderstanding property coverage can send you into financial peril. Reviewing and weighing all the options available for each type of insurance you may need is imperative in choosing what coverage is appropriate for you and yours.

Kurt Rusch CLU, ChFC