Protecting Assets, Estates and Legacy from a Highly Litigious & Entitlement Minded Society
By Ron First | Founder & President of Christian Insurance Services [cINSURE]
The mainstream insurance industry’s business model is a “numbers” approach; not an educational or advisory focus by any means. In addition, service by the giant insurance carriers is defined by how they respond or react to an event, such as a claim or changing bank draft]; not service through preventative counsel and/or financial planning expertise. It is estimated that the 4th largest domestic auto insurer, whose featured salesperson is a cute little reptilian fellow, paid $1.5 billion on advertising development and air time last year alone. Carriers pay this exorbitant amount of money because they know entertainment works.
Conversely, they also know that educating the consumer is not nearly as profitable. Unsuspecting consumers that fall for this potentially devastating revolving door (numbers game), find themselves in the “15% savings-go round”; never quite knowing if they have the right coverage or not. They only know that they won the short battle for the year by finding the cheapest annual price. While consumers may be convinced that they bought the cheapest insurance, most will never know if the type and amount of coverage they purchased are even adequate to protect their unique financial position in life: That is, until they have a devastating claim. Given today’s litigious, sue-happy and entitlement minded society, this methodology can be extremely harmful to one’s financial health.
I Samuel 16:7
When you purchase insurance products such as home, auto and/or rental property insurance, do you or your spouse ever ask why you need them, or do you purchase them simply because you are required to by law (auto insurance)? Do you ever consult with your financial planner, insurance advisor, accountant, or attorney to know what types of coverage and the amounts needed to protect your unique financial position in life? Chances are, 1-800 number representatives or online quoting engines will never ask you the right questions needed to adequately make a recommendation for you on what insurance coverages and amounts are needed, but will rather ask what coverages you currently have so they can try to match or beat your existing price. What is the rationale of doing an apples to apples comparison if the apples you currently have are the wrong fruit in the first place? You would be just replicating error!
IT’S ALL ABOUT DESIGN
So how do you know what coverage and amounts of coverage are needed for your unique financial situation? The answer is actually quite simple: Refer back to your financial plan and goals you and your financial advisor already put in place. Know the different parts of each policy and how these parts protect the plans you already have in place. Be well acquainted with all endorsements your policies have or should have. In other words, ask yourself, “How will my current home and auto insurance support my goal of acquiring, maintaining, or disbursing assets?” depending on what your current life stage financial goal is.
A CLOSER LOOK & SOME PRACTICAL QUICK-FIX ADVICE
An automobile insurance policy has 4 main parts:
- Liability [bodily injury and property]
- Uninsured/Underinsured [bodily injury and property]
- Physical Damage [comp and collision]
- Medical or Personal Injury Protection
Each of these parts play an integral role in protecting something.
It is quintessential to carry the right liability limits so that existing assets are protected from lawsuits. Regardless of how you structure your estate and assets (trust, LLC, S-corp, etc.) if your net worth, for example, is $100,000; having 100,000/300,000/100,000 on liability might suffice. However, if you have suable assets exceeding $250,000 or $500,000, raising your liability limits to 250,000/500,000/250,000 with the inclusion of an umbrella would be prudent in order to protect your future estate from lawsuit penetration.
What is an Umbrella Policy?
An umbrella is an add-on liability policy that supplements your existing liability limits in your base auto policy. A Biblical worldview might also [socially] compel you to have raised liability limits; not just for you, but for the party you injure should you be negligent or at fault (Are we not our neighbor’s keeper?). The concept of restitution is all over the Bible. These few examples of many, present additional exposure and thus, additional risk to your investment portfolio or assets because, if a litigant cannot collect enough from your auto policy, they will typically sue your estate for additional dollars.
Robust Uninsured/Underinsured (UI/UIM)
Robust Uninsured &/or Underinsured Motorists (UI/UIM) is especially important for investors in the accumulation stage of life because you’ll want to have high enough protection to cover against an accident that might debilitate you or your spouse who’s future income you are depending upon. UI/UIM provides you and your loved one’s protection when the party that is negligent harms you and yours but isn’t properly protected to pay for your huge medical bills or future salary you are unable to make as a result of that accident.
Medical or Personal Injury Protection
Medical or Personal Injury Protection provides for needed immediate medical dollars so that a health insurance deductible is properly bridged, whereby the auto insurance policy actually pays your high deductible if you are in an auto accident; not you! PIP is also particularly important to those in the accumulation stage of life [25-50] as it can provide 80% of lost income as a result of an automobile accident.
I Samuel 16:7
Scripture tells us that man looks at the outward but God looks at the inward (your heart and motivation for doing something). In simple language, Ron Blue (Crown Financial, cofounder, and Kingdom Advisors founder) breaks this down for us and states that “every spending decision is a Spiritual decision” (even insurance)!
There are other parts and rationales in your home and auto policies that should be scrutinized on a regular basis. Just as you have annual reviews with your financial advisor, you should also be diligent about how life events impact your need for greater insurance (insulation) against negligent lawsuit. You might be very surprised to find out that a stock market down-turn isn’t the only threat to your estate or investment portfolio; but rather a sue-happy, entitlement minded individual with an accommodating attorney!