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Property & Casualty and The Commodity Sales Trap

Property & Casualty and The Commodity Sales Trap

| August 31, 2018
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Hundreds of millions of dollars have been spent on advertising between all the property and casualty companies.  Progressive, Gieco and The General commercials dominate the television advertising space in this market.  What are they really selling?  PRICE!

 

Yes, these companies have some very attractive pricing on their products.  And, I don’t think they are lying about being able to save people money on insurance.  However, they are not providing the type of coverages our average client needs.  In fact, they are providing upwards of 400k less coverage than is needed for an auto policy. But people do not realize this.

The problem arises when a person files an auto or homeowners claim they discover that they were not covered in an adequate manner.

When we onboard a client at ISC we review the property and casualty insurance for them.  Over 80%, probably closer to 90%, of our clients’ needs some tweaks to their policies or a complete revamp.  Below are highlights of the most common mistakes.

  1. Deductibles – These are often to low.

Auto’s – Most policies we see have $500 deductible for collision and comprehensive.  For the most part, our clients are not going to file a claim for $500.  We suggest increasing this to $1,000.

Home – Most policies we review have $1,000 deductibles for the home.  Again, most of our clients are not going to file a claim for $1,000 or even $1,500.  We suggest looking at a $2,500 or $5,000 deductible.  

When looking at an increase in deductible you want to do the math.  How much money do I save on premium and compare it to how long you need to be claim free to make up the difference in risk you are taking.  (We can help you with this.)

  1. Liability insurance

Auto’s – The most common coverage we see is 100/300/100.  I can break this down for you.

The first number, 100, represents how much your insurance company will pay to any one person that you injure in an accident.

300, this is the second number in your coverage.  This number represents how much money your insurance company will pay in total for all people that may be injured by you in an accident.

The last number, 100, represents how much money your insurance company will pay for property damage by you in an accident.

If you put this together, a 100/300/100 policy will pay no more than 100K to any one person and a maximum of 300K in total to a combination of several people, and 100K in property damage in an accident caused by you.

We usually suggest that our clients take out a 500/500/250 policy.  The cost of the increase is very little.  And, if you increase your deductibles to our suggested level, you may actually see a decrease in your premium.

Home – The most common liability coverage on the home we see is 300K.  We suggest 500K of coverage.  Again, if you increase your deductibles to our suggested level, you may actually see a decrease in your premium.

  1. Uninsured/Underinsured Motorist – This coverage provides coverage to you in case you are injured by someone with either state minimums of no insurance.  About 50% of the drivers on the road in MN have either less than 50K of liability coverage or do not have insurance.

If you are injured by someone and their insurance is not adequate to cover your injuries than this type of coverage will help you.  

It is important that you have this coverage on your umbrella policy as well.  Most carriers will only allow 1M of Uninsured/Underinsured Motorist coverage.  Take it!

  1. Medical expenses – This line item on the homeowners should be at $5,000.  Most policies show $1,000 of coverage.

  1. Sump pump / Sewer Back up – If you have a finished basement we highly suggest you have the maximum coverage possible.  Each carrier is different but the range of coverage goes from 20K – 40K.  I had a sewer backup in one of my homes.  If I went with the standard 10K of coverage I would have paid out of pocket another 15K to restore the basement to the pre-backup condition.

Below is a sample of what we see many of our clients needs when it comes to property and casualty insurance needs.

Recommended Coverage

Autos:

Limits of Liability

500/500/250

Personal Injury Protection – per person

$20,000 – no deductible

Comprehensive deductible

$1,000

Collison Deductible

$1,000

Uninsured/Underinsured Motorists

500/500

Emergency Road Service

Included

Property:

Replacement Cost

 (Guaranteed Replacement)

Personal Property

 (Itemized list with video)

Liability Protection

$500,000

Medical Expense

$5,000

Sump Pump/Sewer Back Up

$20,000

Deductible

$2,500 – All Peril

Other:  Personal Liability Umbrella

$1,000,000 extended over home and autos

$

If you have any questions about your coverage send us a copy of your ‘declaration pages’ for your home, auto and umbrella.  We will review it and send you our thoughts.

You buy insurance to offset the risk for major items on the insurance carrier.  Let’s make sure you have the correct coverages.  

To note – ISC Financial Advisors does not sell or receive any financial considerations associated with Property and Casualty insurance.

Thanks for taking a look!

Tim Jaynes, AIF®

This article represents opinions of the authors and not those of their firm and are subject to change from time to time, and do not constitute a recommendation to purchase and sale any security nor to engage in any particular investment or legal strategy. The information contained here has been obtained from sources believed to be reliable but cannot be guaranteed for accuracy.

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