By Cale Pickford
Originally submitted to Maine Realtor Magazine | Winter 2021
The U.S. is unique in the developed world in that we rely heavily on employers to provide many of the benefits and social safety nets which would otherwise be provided to all citizens on a national basis. The merits of the U.S. system are frequently debated but one clear issue with this system is that independent contractors have to research and purchase their own insurance policies which would otherwise be provided by an employer.
Because of the high cost and difficulty in understanding the products and options available to protect one’s assets and income from risk, many real estate agents, as independent contractors, are at risk − a serious accident or event can have a major impact or their financial well being.
A sound insurance strategy can help protect a family from the financial consequences of loss events. Use the following as an outline for the various insurance products real estate agents should review.
Life Insurance: Your investment advisor may tell you that life insurance is a critical component of a sound financial plan. Anyone who has dependents or a spouse – loved ones who would suffer financially should you die − should seriously consider life insurance because it will allow surviving family members to meet obligations that would have otherwise been funded by your (now missing) income.
Cale Pickford
Disability Income Insurance: In order to maintain your standard of living, it is important to protect your ability to earn an income. Individual disability income insurance helps preserve a portion of your income and provides financial protection if you become disabled for a period of time.
Long-Term Care Insurance: You’re not too young to think about this now. A long-term care insurance policy reimburses a preselected daily amount to cover the cost of skilled nursing care, speech, physical and rehabilitation therapy and services used to assist them with activities of daily living
Health Insurance: Studies suggest that as many as 12% of Americans are without health insurance. Even if you have health insurance or are eligible for Medicare, you should regularly review your plan to make sure that it is the best fit for you and your family’s needs. If you’re on Medicare, talk with an insurance specialist about the best Medicare Supplement Plan for you, to close gaps and reduce out-of-pocket costs.
Homeowners Insurance: Most people who own homes have homeowners insurance. However, a very high percentage of people are underinsured and lack the coverage they will need to make them whole following a loss. Review your policy with an agent, keeping in mind the increasing costs of both construction and to defend and settle bodily injury lawsuits. Also, coverage is very limited for certain types of personal property such as jewelry, firearms, fine arts and so forth, so I recommend insuring items of unique value on a separate valuable articles policy.
Automobile Insurance: Automobile coverage is mandatory in Maine, but just because you have a policy does not mean it will react in the way you expect or need it to. New cars depreciate quickly; make sure you consider gap coverage if you have a loan, or better yet, new car replacement coverage. Learn what coverage you have for towing, roadside assistance, rental cars and glass repair and consider the cost and benefit of having these on your policy. Most importantly, make certain that you have high liability limits and that your vehicle is rated for work use as opposed to pleasure or commuting. It does not matter what coverage you have if a claim is denied for being improperly rated.
An Umbrella Policy: This is perhaps the best value in the insurance industry. Umbrella policies provide protection, in increments of $1 million, for bodily injury and property damage claims which exhaust the limits of your auto, home or watercraft policies. Properly structured, an umbrella policy can greatly reduce the likelihood that a personal lawsuit will devastate your net worth.
Buying a product you hope you never need to use is never a fun way to spend money. Insurance is not the only way to reduce risk: Making smart decisions and being careful go a long way. Still, a properly constructed insurance program is a critical component of a sound financial strategy. Planning for the worst, and hoping for the best, is a good approach in an uncertain world.
Tips to save on your homeowner’s insurance policy
Rightfully so, we focus a lot on ways to make sure your homeowners policy offers proper protection− but cost matters too! Here are some ways to make sure you are getting the best deal in the marketplace:
- Review deductibles: Most insurers structure their rates to reward deductibles of $1,000 or higher. If you have a $500 deductible, you’re likely leaving savings on the table.
- Account credits: Insurance companies are looking for “spread of risk” − that is, insuring multiple policies for the same client. If you have separate insurers for your home and auto look to combine for additional discounts.
- Loss Control Devices: Insurance companies will reward customers who install systems that reduce the likelihood of claims. Central station fire, burglar and low temperature alarms will reduce your premium. Insurers may also offer discounts for automatic generators and automatic water shut-off valves.
- Shopping Around: On a national level, insurance companies have been hit with unprecedented catastrophic losses but Maine has thankfully been spared the worst of these natural disasters. If your renewal premiums have increased significantly, your insurer may be penalizing you for poor performance in other regions. Look for a regional insurer or a national company who has rates in Maine that are more in-line with the risk.
- Coverage Inflation: Insurers increase the amount of coverage on your policy each year. The intent is to keep pace with the increased cost of construction but often those increases compound and the coverage limit gets ahead of the replacement cost of your home. Review the limits of coverage to make sure you are not under-insured or over-insured. My top tip is to find a policy that will offer extended replacement cost of either 125% or 150% of the policy limit, or even unlimited or guaranteed replacement cost coverage. This endorsement will prevent you from being underinsured at the time of a loss.