Maybe you’ve heard the old frog story: when thrown in hot water the frog jumps out but when placed in cool water slowly heated he becomes frog soup. In a way, that story reminds me of many people who come to me for insurance.
They start out from modest beginnings, work hard and achieve success over time. Perhaps they lived in a starter home after college and now have multiple homes in several states. Or maybe they bought a few rental houses and now have six apartment buildings.
They started out with an appropriate simple insurance package (cool water). Then they acquired more assets and their risk exposure became more complex (heat). From scratch one wouldn’t use that simple package to address the complex risk situation (jump into hot water). But each individual change didn’t appear to be a big deal at the time, so it felt more expedient just to do little add-ons. After years, the result is a cobbled together messy knot of multiple agents, carriers, limits, terms and renewal dates (hot water). The dated insurance program becomes a big hassle and there’s a real risk of claims disappointment (getting burned).
My job is to keep frogs out of hot water. To provide the right insurance program for the current situation at the right price. Don’t become frog soup.
Here’s one example: jewelry, art and collectibles. The four different types of coverage listed below apply to various stages of asset acquisition. If you acquire valuable jewelry, art or collectibles over time and don’t change your type of coverage, you risk getting burned.
- Standard Homeowners. Relatively low sublimit subject to the deductible. For example, a policy might have a $5k deductible with a $2k sublimit. So the most you could collect is $2k after a loss of $5k. Very limited.
- Blanket Endorsement. Raises the sublimit and eliminates the deductible. A policy might have a $100k blanket, with $10k per item. The most you could collect on any one item would be $10k, and the most you could collect in total would be $100k. Blanket is good if you have a large number of lower value items and you don’t want to go through the appraisal process. Still, in a claims situation your carrier will typically look for proof of ownership (like a photograph) and value (like a purchase receipt).
- Scheduled Endorsement. Itemized list of your valuable items with appraisals on most expensive pieces. This is the best but highest cost coverage. And it’s more work due to the appraisals.
- Enhanced Features of High Value Specialty Carriers. Carriers that specialize in high value homes (like Pure or Chubb) offer enhancements to their endorsements not generally provided by standard carriers:
- Worldwide coverage
- 90 days automatic coverage
- 150% of limit if market value exceeds appraisal
- Discounts for bank vaulting
- Pair and set (lose one earring they pay for two)
- Client advocates to help seek replacement items
- Higher limits for appraisals and less picky about documentation
Bottom line: There is a limited amount of asset and risk exposure you can hang on an old legacy insurance program before it no longer works. You want the right insurance at the right price for your current situation, not old hot water.
Make it a great day.