“We devote much of our lives to making and living out our long-range plans. We go to school, have children, plant gardens, and save for the future with the expectation that we’ll see the fruits of our efforts. Probably for our benefit, the working out of these plans is full of surprises, often pleasant ones. It’s part of what makes life interesting and worthwhile. Some of the surprises, though, bring bad news, even tragedy.”
Richard E. Vodra, CFP®
Enough Money!: How to Create and
Manage Financial Success in Your Life (more…)
You are likely to need life insurance if others depend on you for financial support, if you provide your family with such services as child care, if you need to consider protecting a surviving spouse or if you have accumulated substantial assets. There are several types of life insurance that you may want to consider. (more…)
By Brad Elman
As soon as we become parents, we’re focused on—and understandably a bit obsessed with—protecting our kids. We swaddle them to shield them from a chill, and we buckle them up in the stroller and car.
That urge to safeguard our children never ends, no matter how old they get. For parents of kids with special needs, that urge to protect is nothing short of fierce, because we know that our kids will be relying on us for their whole lives … and even after we’re gone.
By guest blogger: Randy Schneider
As the old adage goes, “You do not have to be a billionaire to be sued like one.” The fact is a single lawsuit, even if you win, can end up costing hundreds of thousands of dollars and sometimes in excess of a million dollars. In today’s society, more people file lawsuits for more money than ever before. The personal liability coverage available through a homeowners or automobile policy is simply not enough to protect you. An umbrella policy can offer a higher level of liability coverage protecting you and your family from damages for which you may be held responsible. The greater your assets, the more you potentially have at risk. Umbrella coverage can help protect you against personal liabilities that could attack a substantial portion of your current assets, future assets or future earnings.
What is a personal umbrella liability policy?
A personal umbrella liability policy is an insurance contract designed to increase the liability protection over and above a standard home and/or auto insurance policy. The personal umbrella extends your liability protection beyond the primary policy limits – usually sold in million dollar increments. An umbrella may be obtained once your home and auto insurance policies meet a minimum “attachment point” (typically, a liability limit of $250,000 or $500,000). Personal umbrella policies provide four elements of coverage:
- Personal injury: Includes mental anguish, false arrest, wrongful entry/eviction, malicious prosecution, libel, slander, defamation of character, invasion of privacy or negligent infliction of emotional distress
- Bodily injury: physical injury or death – in some jurisdictions, this includes emotional injury
- Property damage: Includes destruction of the property of others, cost of recreation, and loss of use. Worth noting – an umbrella policy does not provide coverage for your own property (such as not having sufficient limits to cover a homeowner’s loss)
- Defense coverage: Includes groundless, false, and fraudulent suits, loss of earnings, bail bond costs and other reasonable expenses
Real Life Scenarios
- You drive down a busy street and accidentally injure a successful entrepreneur in the crosswalk. Medical costs, lost earnings and damages amount to millions.
- A 15-year-old guest at your son’s pool party dives unknowingly into the shallow end of your pool, and suffers devastating paralysis and injuries amounting to millions.
- Your tenant sues you for wrongful eviction, unlawful entry and slander. The cost to defend may be in excess of $300,000.
- Your daughter is injured at a friend’s pool party and is confined to a wheelchair.
Underinsured first party bodily injury pays for her excess medical bills, pain, suffering, modifications to your home and a wheelchair accessible van.
How much coverage do I need?
While many financial advisors recommend that your umbrella policy be equivalent to your net worth, they neglect to consider risk factors that could leave you exposed. A judgment against you may exceed your entire savings. All of your assets are at risk – even your home and future earnings. We recommend that clients review risk factors as a measurement of exposure. Affluent individuals and families that have five or more factors should consider an umbrella policy of at least $5 million. Those with six or more factors may need a $10 million umbrella or higher.
- Earn a high income, anticipate a significant inheritance, have a net-worth over $250,000
- Own an expensive automobile – accident victims tend to have complicated injuries and are less compassionate when hit by a luxury automobile
- Own a swimming pool, hot tub or spas
- An individual in the public eye – a CEO, senior executive, notable shareholder, government official, celebrity, or sports figure
- Own rental property (wrongful eviction, unlawful entry, slander, malicious prosecution may be included in umbrella policies)
- Dog owners, especially a breed with a high occurrence of attack or biting (however, even a Pomeranian has killed two over the past twenty years – source CDC Dog Study, 2002)
- Transport others, particularly children or the elderly
- Have teenagers
- Like to entertain others at your home (dinner parties, pool parties and cocktail parties)
- Own a motorboat, sailboat, personal watercraft or snowmobile
- Serve on a homeowners association board or a nonprofit board of directors
- Own a vacation home
- Own property on a steep hillside – damage caused by landslides to the property of others is covered under personal liability (however, damage to your property is excluded)
- Own firearms
- Employ domestic help and/or occasional workers
Consider Increasing or Adding Umbrella Coverage
Umbrella coverage can help protect you against personal liabilities that could attack a substantial portion of your assets or future earnings. For a few hundred dollars a year, you may add an umbrella policy or increase your policy limits commensurate to your growing assets and “risk factors.” Talk to your personal insurance agent regarding this important coverage.
What does an umbrella cost?
The price of an umbrella policy depends on three main rating factors – the dollar limit of coverage, the number of properties owned/rented and the number of automobiles/watercraft owned. The cost associated with automobiles and watercrafts are much higher than the cost for each property location.
For example, the premium for a $5 million umbrella for an individual with one home and one auto ranges from $270 to $550 per year. The cost of a $10 million umbrella for a family with two homes, one rental property and three autos ranges from $970 to $1,750.
Not all personal umbrella policies offer the same coverage…
A handful of specialty insurance companies (notably: ACE Private Risk Services, Chubb, Fireman’s Fund and Chartis Private Client Group) offer unique or expanded options, such as:
- Personal injury: Enhanced coverage for individuals in the public eye – libel and slander coverage is often excluded by most standard insurance companies.
- Not-for-profit directors and officers coverage: Coverage if you are sued for personal injury or property damage resulting from your volunteer service on the board of a not-for-profit organization and/or homeowners association.
- Uninsured/Underinsured motorist protection: Provides higher limits for uninsured/underinsured coverage and/or property damage from an uninsured driver.
- Uninsured/Underinsured first-party bodily injury: Provides coverage when other negligent parties are uninsured or underinsured to pay for your family members injuries. This is only available from ACE Private Risk Services and Fireman’s Fund.
- Employment-related lawsuits: It is not uncommon for domestic staff such as nannies, housekeepers, private assistants, gardeners and other domestic staff to take their employers to court citing claims of wrongful termination, sexual harassment and discrimination
- High Limits: Most insurance companies provide a maximum limit of $5 million. Few carriers regularly offer coverage from $5 million – $10 million. With very few exceptions, only four carriers offer $10M or more. Chubb, Chartis Private Client Group, ACE and Fireman’s Fund have the capacity to provide coverage up to $100 million. Additionally, these companies are backed by the highest ratings for financial strength and claims paying ability.
- Unlimited Defense Costs: Most companies limit the amount of money associated with the cost to defend a lawsuit. With Chubb, Chartis Private Client Group, ACE and Fireman’s Fund the defense costs are unlimited – even if the cost exceeds the stated policy limit.
About Fort Point Insurance
Fort Point Insurance Services, Inc. provides comprehensive insurance products and services to help meet the unique risk management needs of affluent individuals and families. Working with clients and their most trusted advisors, we analyze coverage gaps, identify potential loss exposures, and recommend proper limits of liability to protect both property and financial assets. We accomplish this by drawing on our relationships with the nation’s most respected insurance carriers, and from our own experience in serving the private client personal insurance market. Based in San Francisco, we work with individuals and families across the United States and around the world.
About Randall Schneider
Assistant Vice President
Fort Point Insurance
Mr. Schneider began his insurance career at Selective Insurance, in Baltimore Maryland, after Graduating from Ithaca College in Ithaca, New York in 1995. At Selective, he served as an Underwriter, and as a Business Systems Analyst. In 1999, Mr. Schneider joined the Chubb Group of Insurance companies, in Boston, Massachusetts, where he spent eleven years as an E-business Consultant, Marketing Specialist, and most recently, as Assistant Vice President and Regional Manager in charge of Chubb’s Personal Lines Operation in Northern California. Mr. Schneider lives in Oakland with his wife, Andrea, and son Cody. He and his wife are avid skiers, travelers, and love to eat foods from around the world.
If your “to-do” pile contains a bulging file of paperwork for your tax return, you have plenty of company. The months leading up to April 15 are when everyone gathers and reviews their W-2 forms, investment statements and donation receipts.
These first few months the year—when your finances are front and center—is the perfect opportunity to start (or continue) building financial security. There’s nothing more powerful and comforting than feeling confident about your financial future.
If you’re stuck or don’t know where to begin, these five steps will get you moving:
1. Know Your Numbers: This is one of the most powerful steps you can take. Add up all of your assets: bank and investment accounts, college savings accounts, all retirement plans, the value of your home and other real estate, cash-value life insurance and all other assets.
Then, subtract all your debt: mortgage, car loans, student loans, and any rolling credit card balances. The result is your net worth, a critical piece of your retirement plan. The level of net worth is not as important as its growth over time. Focusing just on assets, it may seem that you are not getting ahead – especially when the investment markets are down. But paying off debt has the double benefit of increasing your net worth and decreasing your future interest expenses.
Next, calculate what you spend. “I don’t want to track every latte and People magazine,” one of my clients moaned. But I encouraged her to do it anyway, even just for a week. If you don’t know where your money is going, then you can’t create a specific plan to add to savings, pay down debt and move yourself along the path to financial freedom.
You can track spending with software like Excel or Quicken. I’ve turned many of my busy clients on to www.mint.com, and I use it myself. This free tracker is easy to use and secure. Once you set up your account, Mint’s software automatically tallies your expenses, assets and debts. It even prepares helpful pie charts and budgets. And you can access it as a mobile app too.
2. Create a Vision: What does financial freedom mean to you? Here’s what some of my clients have said:
- “Getting totally out of debt, for once and for all.”
- “Paying for college for my kids so they don’t have student loans and part-time jobs, like I did.”
- “Retiring at 55.”
Dream big! Choose something that inspires and motivates you. Consider creating a “dream board” with your partner or a friend, using pictures showing the life you imagine yourself having.
3. Be SMART: What steps can you take today, next week, next month to move yourself and your family closer to that vision? Work backwards from your vision to create goals that are Specific, Measurable, Achievable, Realistic and Time-Based. They’re the ones most likely to succeed.
Our financial goals move within reach when we make them automatic and tangible. My clients “Mimi” and “Scott” recently set up an auto-transfer to move $100 each month from their checking account into a 529 college savings fund for their 2-year-old son, Taylor. That may not seem like much, but this investment has 16 years to grow. And these parents are so excited about this painless way to save that they’ve vowed to increase their monthly investment when Mimi returns to work.
4. Educate Yourself: I know, numbers are “not your thing.” They can be overwhelming, depressing and scary, especially when you’re thinking long-range. So take small steps. Read an investment site—I like the practical advice in Money magazine and the tools and tips on the Financial Planning Association Web site http://www.fpanet.org/.
5. Get Support: When you became a mom, many people shared meals, gifts and encouragement. Tap some of those supporters as you create and implement your financial plan. Professionals—your accountant, estate planner or financial planner—can do some of the heavy lifting for you. But ultimately, only you can shoulder the responsibility of making sure you’re planning today for the future of your dreams.
It’s open enrollment season for employee benefits. To maximize your benefits, review your health, life, disability, pre-tax savings plans and retirement account options carefully. Use this checklist from the Financial Planning Association for tips on selecting benefit options.
In particular, focus on your health insurance benefits. The Wall Street Journal reports that many companies are selecting plans with higher deductibles together with Health Savings Accounts (HSAs). If your health care plan is changing, you may need to adjust your HSA contributions.
The National Association of Insurance Commissioners (NAIC) reminds consumers to make health care selections carefully. In most cases, you won’t have a chance to make changes again until this time next year. Learn more about open enrollment from the NAIC.