An Often-Missing Dimension

Sometimes their policy limits must be increased, and other times specific features of their policies — which often are difficult for clients to understand because policies tend to contain specialized insurance terms — need a thorough review. These policies include details like “all-risk” versus “named risk” coverage, extended replacement cost, agreed value and worldwide coverage, which can be confusing.

Over time, four common gaps often arise in your clients’ protection:

• Valuation gap: This arises from your clients’ insurance being based on incomplete or inaccurate valuations;

• Replacement-cost gap: Long-held policies often don’t account for the cost to fully replace your client’s home or other valuables, which they likely believe are fully insured and protected;

• Appraisal gap: Very often, your clients’ valuable items are being protected at below-market values because they haven’t been reappraised or reassessed in years. This frequently happens in connection with art and jewelry;

• Cap gap: The current caps on your clients’ liability insurance policies often are too low, and may be structured in ways that may hinder their legal defense needs.

Very often, your clients may have acquired their property and casualty insurance coverage, perhaps from several carriers, in an episodic way over time as they bought homes, cars and a variety of possessions.

While that piecemeal approach to insurance may have made sense at the time, a comprehensive review of their coverage often can lead to economies and improvements in protection.

Considering how quickly the lives and assets of successful individuals and families can change, it’s my view that their coverage needs should be reviewed yearly. Under the direction of a trusted, licensed property and casualty independent insurance agent, a thorough review of your clients’ property and casualty coverage should include:

• Evaluation of the client’s risk profile and their potential for loss;

• Analysis of their current coverage and a review of whether their policy or policies provide the comprehensive protection the client needs;

• Analysis of the client’s current insurer and whether their services, terms and financial strength are right for the client;

• Recommendations for policy limits and specialty coverage;

• Recommendations of loss-control measures that would help limit potential property or liability exposures. A deeper understanding of the details of some of today’s protection plans can help minimize your client’s future exposure.

A review of property and casualty coverage is not what most financial advisers do, but playing a part in such a review offers a unique and potentially rewarding way to add value to the services you offer.

Remember, property and casualty coverage is asset protection. Saving even one client from a financial catastrophe through such reviews is reward enough. If you have any questions about this subject, please email me at [email protected].