The Empty Hook Theory

 

Frances Zeman, Accredited Senior Appraiser of the American Society of Appraisers, reminds us in this important one page primer of the importance of being able to document the value of what one owns.  Ms. Zeman encourages collectors to consider themselves as custodians for the property they own, and shares several good ideas on how to do so effectively.  Armed with a close understanding of the pitfalls awaiting those who fail to plan, Ms. Zeman can provide you or your clients a better understanding of the appraisal process. Ms. Zeman concludes her article by reminding collectors of the dangers of subscribing to the adage “what you don’t know won’t hurt you.” 

 

A New Imperative: Greater Peace of Mind

Given the tumult that is occurring in the marketplace, many clients are re-discovering the importance of aligning their insurance coverage with carriers that can best document their financial stability and strong claims paying ability.

With fortuitous timing, a new provider of comprehensive insurance coverage can also demonstrate remarkable financial stability, and is now open for business: ACE Private Risk Services.

All professional advisors and consumers who want to be aware of quality providers of insurance and risk management services should take a moment to learn about ACE Private Risk Services.  This financial fact sheet tells just a part of the story, but an important part. Contact me for more details on the quality insurance solutions and greater peace of mind this carrier can provide.

 

AIG’s Issues and Solutions: the two news stories you must see

Looking Back: How it Unraveled  To gain a better understanding of the reasons behind AIG’s financial woes, NY Times reporter Gretchen Morgenson offers this fascinating expose on what went wrong.

Looking Ahead: The Plans to Move Forward For insights on how AIG plans to reshape itself moving forward, click this link to watch AIG’s Road Ahead, an interview with Edward M. Liddy, Chairman & CEO by CNBC’s Maria Bartiromo.

Risky Business

From this month’s edition of the fine publication “Financial Planning”:

“Whether your client is high-net-worth or working to become so, it is incumbent upon financial planning professionals—often the most trusted advisors—to position insurance as a critical protection for the assets they have worked so hard to build. Working with an independent insurance broker is particularly important for high-net-worth clients who may have very sophisticated needs, but an independent broker can provide all of your clients with a broad choice of coverage and carriers. Many insurance carriers will be happy to give you a list of referenced brokers.

Your relationship with your clients is based on trust and good advice. Sound advice on protecting your clients’ assets is just as important as your advice on growing them.”  

Click here to read the article

Why the rising costs??

I am often pressed to explain the rising cost of insurance — not an easy task. As with the rising cost of anything, a complete explanation involves revieiwng many factors (boring). There is one leading factor driving the rising cost of insuring homes that the WSJ recently decided to cover.

 

I am surprised that many I speak with do not realize insurance carriers also buy insurance on the risks they insure. The process of buying “reinsurance” allows insurance companies to spread their exposure to large, catastrophic losses that can strain their ability to pay many claims and remain in business.  

 

I share this because the factor with the greatest influence on the rising cost of home insurance (especially those in coastal areas) is the rising cost of the reinsurance that insurers are paying. Of course, those rising costs are passed along to all of us in the form of rising premiums. This page one Wall Street Journal article offers a thorough and interesting explanation behind the factors driving of the rising cost we are all required to pay to insure our homes.

An Ounce of Prevention…..

This year marks the 70^th anniversary of the unnamed hurricane that devastated Eastern Long Island and much of New England. While the NY Metropolitan area has been impacted by hurricanes since, it has also been awhile. Given this reprieve, there is a real complacency among homeowners to become better prepared. Ask yourself: if a hurricane was a day away, would you make any changes to prepare for it? A suggestion: if you answered yes, take the time and do so now.  This video from the Insurance Information Institute offers some basic but overlooked tips to prepare homes to better sustain the winds and rain that will arrive — one day.

 

Delay Deny Defend

McKinsey & Co., the giant consulting firm, has helped several major insurance carriers to increase their profits by devising alarming claims strategies that all consumers should be aware of.  Check this link  to access video of a CNN investigative report that is essential viewing for all insurance consumers.

When Transferring Real Property to a Trust or LLC

As high net worth individuals embrace the tax and asset protection benefits of placing private property ownership in the name of a trust or LLC, critical insurance coverage issues arise. Few trusted advisors or property owners are aware that the “named insured” insurance contract provisions prohibit the extension of coverage to protect the interests of the real property owner – the trust or LLC – in the event of a covered loss.

The resulting coverage void can remain undetected for years, only becoming apparent after a loss for which the application of coverage has been invalidated. Depending upon their role in the creation and administration of the trust or LLC, some advisors may even discover they have a professional liability exposure in the event of an uncovered loss. 

                                                                                                                                                           Click here to access an article from The CPA Journal that explains this problem and the solutions that can be made available.  

Examining the Causes of Residential Loss

To Hedge, or not to Hedge….

 

An interesting question was recently presented on Terri Cullen’s great WSJ blog for her Fiscally Fit column by someone who labeled themselves a “contrarian”. In essence, the post asked: “since the likelihood of losing a home to fire is remote, why bother insuring the home for the full cost to rebuild?”

 

I don’t think this question is contrarian at all, I think it is fair and logical. Savvy consumers know to beware of insurance “scare mongers”, who would have us believe that the sky is about to fall on all of our homes. Meanwhile, statistics reveal that the risk of a fire totally destroying any single home is remote.  Click here for some good insights, or check this site:  https://www.usfa.dhs.gov/statistics/national/residential.shtm

 

For those who wish to hedge the unlikely risk of a fire consuming their home by partially insuring the cost to rebuild, the insurance industry has erected significant pitfalls. While these can be navigated, doing so requires careful guidance.

 

As both a risk advisor and an insurance consumer, I would also describe myself as a “contrarian”. Meanwhile, knowing a.) fire is but one of the losses that can wreak significant damage to my home ( Click this link for a chart showing the leading losses by cause to homes), and b.) the insurance carriers who “allow” consumers to hedge against total losses do so by inserting numerous contract provisions that greatly reduce the amount they will pay after a loss, I would never elect to hedge the slight risk of a total loss by selecting a policy that offers “partial coverage”.  Others I know consider this a risk worth accepting. Neither approach can be judged “right” or “wrong” until after a lifetime of home ownership.

 

It is always wise to examine risks from different perspectives. In this instance, there is real risk in placing coverage with insurance carriers who so graciously permit you to partially insure your home.

 

 

 

Not Your Father’s Home Security System

While having a fire and burglar alarm system can offer some peace of mind, most property owners are curious to know how technology can help them better protect their home — and their families while at home. While I am not an expert on home security, I am a good resource in directing homeowners to the select group of specialists focused on advanced home security and “smart home” technology.

 

One organization I’ve worked with locally has merged advances in home security with smart home technology in an easy to use way that offers great home security and utility. Connected Hearth is an exciting service provider, with a website that lets you monitor and control your home from anywhere in the world. Through ConnectedHearth.com, you can control your security system, your heat and A/C, your indoor and outdoor lighting. You can pan a camera throughout your house. You can even have a hot cup of espresso waiting for you when you arrive. All this, from a computer. Wherever you happen to be.  Click on this link to be re-directed  to their web site.

 

Or, feel welcome to contact me for information on other new advances in home security, and to learn which carriers are providing real incentives to improve the loss prevention features in the homes they insure.