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Financial Planning > Behavioral Finance

What Financial Risks Lurk in Your Clients' Cars?

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While today’s sedans, SUVs and light trucks are more efficient, better made and safer than vehicles in the past, accidents still happen. An estimated 6,734,000 Americans were involved in police-reported vehicle crashes in 2018, resulting in 36,560 fatalities and 2,710,000 injuries, according to the National Highway Traffic Safety Administration.

Because today’s vehicles also are much more sophisticated, the cost of repairs can be extraordinary, as can the unintended consequences when damaged vehicles are sold or junked. Even if your clients have auto insurance, their safety as well as their retirement nest eggs and other financial assets may be at risk.

Consider the case of Andy, whose relatively new luxury SUV was in an accident that damaged its wheels and one of its hinge pillars, which is a critical component to supporting a vehicle’s structure. The insurance estimate for repairing Andy’s leased vehicle came in much lower than the actual cost to restore it to its original integrity. Andy’s situation underscores the problem of most standard auto insurance policies not covering the cost of replacing expensive components with parts from the vehicle’s manufacturer or replacing the vehicle entirely, if repairs can’t return the car to its original structural condition.

The above example shows that not all insurance coverage is the same; the difference is in an insurer’s approach. Coverage with a premier insurer would have paid Andy’s remaining financial obligation and saved him from driving a potentially unsafe vehicle, or even paying tens of thousands of dollars to his leasing company when the lease ended. That approach helps protect Andy and eliminates the need for him to dip into his other financial buckets that were likely put in place to achieve longer-term goals.

Furthermore, superior coverage involves looking for ways to do more for the client. In Andy’s situation, a premier insurance provider might have gone the extra mile and looked to eliminate any additional risks associated with the accident that are not so obvious. For example, the insurer might look to remove personal data, which is often stored on today’s computer-laden vehicles.

Home security information, as well as other critical data left on a damaged vehicle’s electronics system, can result in the loss of personal privacy and potentially expose one’s assets and electronic identity to criminals. Toward that end, as part of the overall process, an insurer dedicated to successful individuals should make sure personally identifiable information is removed from a totaled vehicle.

Given these points, many clients of financial advisors can benefit from having an auto insurance policy that is more comprehensive than mass-marketed coverage. And while no one expects financial advisors to be experts in the nuances of automobile insurance, a recent survey conducted for Chubb found that 85% of successful families place considerable importance on their financial advisor acting as their “financial quarterback” to help them navigate a wide range of financially-related matters, including insurance.

Developing a relationship with a knowledgeable property and casualty insurance agent who can provide an annual review of clients’ coverage needs is a best-practice way of meeting and exceeding your clients’ service expectations. Many times, an expert review of property and casualty coverage will reveal ways in which clients can consolidate coverage and save money, while improving their level of protection.

Certainly, for the personal anguish that might come as a result of an auto accident, financial advisors can only provide the emotional support that helps healing. But to help insulate clients from the financial harm than can come from auto and other accidents, financial advisors can be an invaluable asset.

Fran O’Brien is Division President, North America Personal Risk Services, Chubb. She can be reached at [email protected].


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