Sometimes, executives are so busy pursuing the American dream that they
forget to protect the hard-earned assets they have accumulated along the
way. Vacation homes, jewelry, boats and
cars are frequently part of a burgeoning list
of assets acquired by executives, while
board-of-director roles, managerial assignments and international business travel are
some of the responsibilities that accompany success. Each possession and professional activity needs to be evaluated by a
broker for potential physical loss or liability exposure, and insured accordingly.
Approximately 70 percent of clients are
underinsured, according to Michelle
Baxter, personal lines broker with West-land Insurance Brokers. “It is more expensive to rebuild a home than to build it
because of demolition and debris removal
costs,” says Baxter. “Many homeowners
fail to take those expenses into account
when they calculate their homes’ replacement cost, if they aren’t advised by a professional broker.”
Smart Business spoke with Baxter about
how to close coverage gaps and reduce liability exposure with personal insurance.
How often should I meet with my broker?
Your broker should review your portfolio
annually, including an evaluation of all of
your assets and your lifestyle. The broker
should ‘shop’ your coverage needs among
several markets to determine the best
value and insurance carrier for you. I say
value as opposed to price because coverage should be placed with an A-rated carrier and certain markets cater to high-wealth
individuals, so their policies contain clauses that provide protection for the kinds of
exposures that executives frequently have.
Saving on premiums in the short run often
can cost you more in the long run.
What is my broker’s role in reducing my
exposure to loss and managing my needs?
You should have one broker who should
place all of your coverage with one insurance company.
Primarily, this allows your broker to view
your entire lifestyle and portfolio of assets
for gaps in coverage and potential exposure.
For example, if you purchase a vacation
home and secure the insurance coverage
through escrow at closing, that policy might
have liability limits of $300,000. Meanwhile,
your personal umbrella policy is with another carrier and it provides coverage for losses that exceed $500,000, resulting in a coverage gap of $200,000, which could be avoided by having one broker who oversees all of
your needs. Hiring occasional or full-time
workers, such as a nanny or housekeeper,
can also increase your exposure, as does
renting out a vacation home, so all of this
must be taken into consideration.
Also, placing all of your coverage with
one carrier is generally more cost-effective
because it allows for premium credits and
elimination of costly redundant coverage.
Finally, your broker should be the first person you call in the event of a loss. When you
report a potential claim to a carrier, all insurance companies are notified regardless of
whether the claim gets paid. In some cases,
especially where the claim may be below
your deductible, it might be best not to
report it at all. Your broker will know what
the right answer will be for each situation.
What are examples of personal lines protection that executives should consider?
Your broker should suggest a personal
articles floater if you own jewelry, rare
wines, collectables, musical instruments or
fine art, and all items should be appraised.
This will cover the items at full value
against loss or mysterious disappearance
without a deductible. If you own a condo
as a primary residence or as a rental property, you have personal liability exposure
that extends beyond the master policy
written on the condominium association.
For example, if a fire starts in your unit and
damages other units, you might have financial responsibility to others.
Extended replacement cost coverage for
homeowners is another recommendation. It
provides additional protection in the event
you discover that you are underinsured
after a loss. For example, if you have purchased $500,000 in replacement cost coverage for your home, and after a fire you find
that it will actually take $550,000 to replace
it, the endoresement clause will provide for
$550,000 in replacement coverage automatically; you need only pay the additional premium. Also, you don’t have to settle for coverage limits provided by the California
Earthquake Authority. A professional broker has access to other markets that provide
broader coverage for reasonable rates.
What are the other benefits of working with a
professional broker?
Brokers can assist executives with busy
lifestyles by recommending appraisal
firms, companies that will scan valuable
documents or videotape your belongings,
so you have a catalog of your assets. They
can also assist in calculating accurate
replacement cost values for your properties. As your wealth builds, so does your
exposure to loss and your need for professional guidance. It takes years to build the
American dream; it only takes a few minutes to lose it.
MICHELLE BAXTER is a personal lines broker with Westland Insurance Brokers with 20 years insurance experience. Reach her at
(949) 553-9700, (800) 541-9663 or [email protected].
