While it's common to work with your clients to review their life and disability insurance coverage, it can be equally important to help your clients review their casualty insurance coverage to be sure it meets their needs. This includes both personal coverage and coverage for their business if they are business owners.
On the personal side, casualty insurance might include:
Additionally, depending upon where your client is located, they might consider purchasing specialized catastrophic coverages such as:
- Flood insurance
- Hurricane insurance
- Earthquake insurance
All of the coverages listed above are about protecting your client’s assets. In the case of homeowner’s insurance, for example, this will pay to repair or rebuild their home in the event of a fire or other disaster. It’s important for advisers and their clients to review what types of damage are covered and what aren’t. Also of importance here is to determine whether the amount of replacement coverage has kept up with the home’s value. Some policies might be automatic full replacement, others may require an update to reflect the value of the home. Don’t depend on the institution that provided your client’s mortgage -- their main concern is in regard to the amount of the loan.
Most homeowner’s policies also contain a liability portion that covers the homeowner in the event someone is injured on their property. Let’s say someone trips on the front steps, falls and injures themselves. This portion of the policy would then kick in if needed.
Automobile insurance may include repair or replacement of the client’s vehicle in the event it is damaged in an accident. More important, from an asset protection standpoint, is the liability portion of this coverage. This portion of the coverage protects your client in the event they are sued in connection with injuries to one or more of the other parties to an accident. If someone is seriously injured or killed and your client is at fault, a judgement against them could have a devastating financial impact without the proper insurance coverage in place.
An umbrella policy is just what it sounds like. It is a personal liability policy whose coverage extends beyond what is offered in an auto or homeowner’s policy. The umbrella coverage kicks in after the limits for other policies are exhausted. Umbrella policies can also protect your clients against liabilities arising from libel, vandalism, slander and other acts. These policies can be especially important if the client has hazards such as a swimming pool or a trampoline on their property, or if they own a dog. Landlords, those who coach children’s sports teams, those who volunteer and those who post reviews of products or companies on the web might all benefit from an umbrella policy.
For clients living in certain areas of the country, they may need specialized coverage against certain catastrophic hazards.
Flood insurance can be purchased through a federal program called the National Flood Insurance Program (NFIP) that is managed by FEMA. Policies are offered through private insurance companies. For those living in areas designated as floodplains by NFIP, they will be required to obtain this insurance in order to obtain a mortgage, including refinancing.
Homeowner’s policies will cover internal water damage from things like a busted water pipe, but not from natural external disasters like floodwaters. If your client lacks proper coverage, they could end up with a catastrophic loss and insufficient or no insurance coverage. This could create a tremendous financial hardship for them.
Earthquakes are also generally not covered by conventional homeowner’s policies. Unlike with the federal flood insurance program, there is no federal program for this coverage. Clients living in areas that are prone to earthquakes might consider this coverage. In doing so they need to look at what the policy covers and the costs. For those clients for whom this coverage is applicable, it can be a financial lifesaver if it is needed.
Hurricanes are another natural disaster which could impact your clients depending upon where they live. There are no separate hurricane insurance policies per say. Rather, homeowners would need to cover themselves in a variety of ways. Flood insurance could be purchased to cover the damage from floods due the aftermath of the storm related to high water levels and flooding. In some areas homeowners may need to buy an additional policy covering wind damage as this might not be fully covered by their homeowner’s insurance.
For clients who own a business, you will need to work with them to ensure that they have the types of casualty coverage in place to ensure they reduce their exposure to loss from disasters such as fire, but also from other types of liability that arise from running their business.
For both your client’s personal and business situation, having the proper types of casualty insurance in place is a critical part of the asset protection planning you do for them as part of their financial plan. Whether you do this personally or have them work with a trusted insurance professional, be sure this type of review is done on a regular, periodic basis.