High Net Worth
Does it Make Sense?
Does it make sense that the home on the left and the right should have the same homeowners insurance policy? I mean does one size ever fit all? Most standard personal insurance policies are created for the masses and therefore cater broad coverage needs. Individuals with high-value assests are more likely to require customizable policies that afford the flexibility to address nuanced exposures.
Most individuals view insurance as a necessary evil. Because standard insurance carriers commoditize their offerings through their advertising campaigns, many folks may believe that the simple act of buying insurance equates to being adequately protected—a belief that can prove perilous.
Buying Insurance the Right Way
Your goal in buying insurance should be to get the best policy possible at the lowest premium possible. A good policy has the fewest possible major coverage gaps. The secret to eliminating gaps in coverage is to include, in your decision process, the findings or an independent agent or advisor who is highly knowledgeable in the particular type of insurance you need help with. The agent can identify gaps in your coverage and propose solutions that plug those gaps.
You can create a solid insurance portfolio without major coverage gaps and still get a competitive price using two different strategies:
- Shop price first. Shop for the company with the lowest price you can find for the coverage you need. Then, don’t buy from whoever answers the phone. Find the most knowledgeable agent you can who represents that company. With his/her help, determine what coverage you need.
- Shop expertise first. Find the most knowledgeable expert you can. Then, buy the insurance from her/him at the best price they have available.
Shopping Expertise First
The greater your assets and income, the more strongly we recommend this strategy of choosing expertise first as the most important element in your insurance-buying process. If you have a lot to lose, absolutely shop expertise first. Spend extra time to locate the most expertise you can find. You upfront price won’t be quite as low as with the other choices, but you’ll have the least chance of a major uninsured loss. Which is far more important than any up-front savings.
The true cost of insurance is twofold: what you pay up front in premiums, and what you pay out-of-pocket at claim time for insured claims. People who buy insurance incorrectly focus only on the cost of the premiums. No one has ever gone bankrupt because of the insurance premiums, but many people have gone bankrupt because of uncovered claims.
Bargain Basement Brain Surgery
Suppose you’ve been told you need brain surgery. If you shopped for it like many shop for insurance, here’s what you’d do:
You start by calling around town, getting quotes over the phone. You’re not sure exactly what kind of brain surgery you need, so you decide to get a price for the type that you think you probably need. You get quotes from all over- from surgeons, clinics, hospitals, and even medical school interns. You’re not concerned about skill—just price. After all, it’s only brain surgery.
You find a clinic that will do the surgery you think you need for the lowest price. You sign up for the brain surgery. The intern who answered the phone when you called does the surgery, even though one of the top brain surgeons in the area works for the clinic and would do the surgery for the same price as the intern. The intern, lacking the expertise to diagnose the exact type of surgery you need, performs the surgery you asked for in the quote. The top brain surgeon would have known enough to recognize that what you requested was the wrong procedure for you and would put you at risk for serious brain damage. She would have recommended a different, more expensive, but much more helpful surgery instead.
Insurance isn’t brain surgery. But it isn’t a commodity either. The moral of the story is that if you shop for insurance like this, you’ll probably end up with the wrong diagnosis, with possible serious side effects, and with a less skilled advisor than you need and could have had for the same price.
Click here to request a copy of our free report: Ten most common gaps, goofs and inadequacies in high net worth insurance programs. And then contact the professionals at Cincinnati General Insurance Agency LLC for a no-obligation review on all your insurance policies.