Personal Risk Management

by Jeffrey Cavignac, CPCU, ARM, RPLU, CRIS, MLIS – President, Cavignac & Associates
I don’t sell personal insurance, but I understand it, and one of the services I offer my business clients is a review of their personal insurance program.  I am constantly amazed at the gaps, holes and inadequacies that I find!

    • The owner of a $100M contracting firm, a man with a net worth well into the double digits, had his personal insurance handled by a direct writer (State Farm, Farmers, Progressive).  He had teenage drivers.  A review of his policy determined that his auto limits were $100,000 for bodily injury and $50,000 for property damage!  He had no personal umbrella.
    • A good friend of mine owns a fractional interest in a houseboat which is kept on Lake Powell.  This means kids, teenagers, alcohol, personal watercraft…in short, a severity loss waiting to happen!  The boat is owned by an LLC which has a $500,000 liability limit.  My friend’s personal umbrella specifically excludes watercraft liability unless the watercraft is scheduled on the policy…which it isn’t!
    • Another friend has a more significant problem.  His teenage daughter was involved in an at-fault accident while driving his car.  She was drunk.  The injuries to the other parties are significant and he only has $1.5M in liability limits available.  Damages will probably go well above that, and he will have to fund the difference out of pocket…it could bankrupt him.

My question to you is this:  When was the last time you evaluated your personal insurance program?  What deficiencies would I find if I reviewed it?  I strongly encourage you to pull out your homeowners, auto, umbrella and any other personal insurance policies you might have and conduct a brief audit of your coverages.  Here are the questions you need to ask yourself:

        1. Are my property values adequate? Check your home and personal property.
        2. Do I have any highly valued items that need to be scheduled, such as jewelry, artwork, wine, etc.?
        3. Do I have adequate coverage for “Additional Living Expense?”
        4. What are my total (primary and umbrella) personal liability limits?  Note that I consider $2,000,000 as a minimum anyone of reasonable means would want to purchase, and $5,000,000 is recommended.
        5. Are there any boats, secondary residences, personal watercraft, etc., that need to be scheduled under your umbrella policy?
        6. Do you have a knowledgeable proactive personal lines insurance broker?

My message here is simple. Don’t wait until you have a loss to check your insurance coverage.  The difference between inadequate coverage and appropriate coverage is usually pennies a day.  Make sure you get it right!