Sarah Gans:
Hello, and welcome to Sequoia Wealth Builders, a podcast that provides tangible steps and fun discussion on how you can maximize your investments and grow your wealth. I'm your host, Sarah Gans, Advisor at Sequoia Financial Group. On today's episode, we're talking all about insurance. I'm speaking today with Michelle Hirsch, who is the Senior Vice President at Brunswick Companies, which is a third generation family owned business that her grandfather started. Thanks for joining us, Michelle.
Michelle Hirsch:
Thank you, Sarah, for having me.
Sarah Gans:
I really appreciate you taking the time to educate us on property and casualty insurance. Michelle recently did a review of my insurance policies and I was shocked to see some of the things that I should have been looking at that I didn't even know that I needed to. So I'd like to start with home insurance, if you don't mind.
Michelle Hirsch:
Sure.
Sarah Gans:
So I recently bought a house in Tampa and there were a lot of different areas that I didn't even think to look at. I essentially went with our realtor's recommendation on an insurance company. So can you kind of go through what specific areas individuals should be looking for within their policies when doing a review or looking for a new provider?
Michelle Hirsch:
Sure, absolutely. It's very intimidating when you're buying that first house or looking to buy a new house. You have mortgage brokers that are hounding you to get proof of insurance and you have 10,000 other things on your list buying this new home. But, really, looking at your home insurance is so important because there's so many different coverage definitions, exclusions, endorsements, and every policy is different. And that's what I think people don't realize is that no two policies are the same and it's not necessarily a get what you pay for kind of world. You could get far better coverages and still pay less. My recommendation is to work with an independent broker because they save you time, they have access to all these different carriers, and they really understand their stuff as opposed to going online or working with a captive broker, so the brokers that only work with one carrier, agents that are married to one carrier, it's very limiting.
So having as many options out there as possible, an agent that can put together a comparison chart for you, and also walk through each one of the coverages to explain to you what these things actually cover and is it important? Being a homeowner, there's a lot of responsibility there, so when you wake up one day and there's water on the floor, you say, "Oh my goodness," at least have an idea of how your policy would respond. And so education is key. This is not something that's another transactional, check the box, set it and forget it. It's really important to understand your policies, but it's important to have a trusted advisor in your agent that can walk you through all that stuff and educate you.
Sarah Gans:
I was actually really surprised to know within my policy that if something were to happen in my house were to burn to the ground, I wouldn't be able to cut a check for the value. I would essentially need to rebuild exactly on that plot of land, and it's a town home, which could be very difficult to do.
Michelle Hirsch:
Yes, absolutely. Having a cash out option is key. You want that flexibility. Who knows if you're going to want to rebuild the house or if you want to just take the check and move on with life. And if you are able to take the check, having the right amount, that value, making sure that your home is valued correctly, is really important because what should be listed on your policy is replacement cost, not how much you bought or could sell it for. It's how much it would cost if that tornado came through and you had to rebuild it from the ground up. And most people don't realize that and or aren't getting the right guidance to make sure that, that number is correct.
Sarah Gans:
That's really helpful information and I know for the liability protection, it's all of the things that you own. So your furniture, your clothes, all of that. So what do you recommend doing to make sure that, that is covered in its entirety as well?
Michelle Hirsch:
Sure. So on your policy, you have a separate line just for personal property, and this is all of your stuff. So if you took your house and you turned it upside down and you shook it, what falls out, what's not attached to the house? So all your furniture, your appliances, your electronics, your clothes, your shoes, anything that you have to go out and buy to refill this house, that's all considered personal property. So what happens is, is that's an automatically defaulted percentage of the dwelling amount on your policy. So it's not really a number that has been calculated in any scientific way. So what we suggest is go room by room, take photos and videos and do a little inventory and say to yourself, "How much would it cost to rebuy all of this stuff?" And then see what that number comes to, and then double check your policy to see if it's the right number.
Michelle Hirsch:
It's really cheap to increase that amount and it's really important to have documentation because the last thing you want to be doing is fighting with an insurance adjuster on how big your television is. But if you have the picture, there it is. That's what I'm going to request when I want my check to go out and buy a new TV.
Sarah Gans:
Sure. And my fiancé loves sports memorabilia. I have an engagement ring. Are those things included if they were in the house at the time that something happened?
Michelle Hirsch:
That's a great question. And no. So any collectibles or any jewelry or art is not considered personal property because it has a higher value. So all of the personal property will be replaced at replacement costs. But if you have things that are special and have collectible value, you have to go out and get actual appraisals for it. And then you can schedule it on your policies for that specific appraised value. A lot of people think that things would be included in that personal property but you really have to go through and spend the time to get the appraisals to have that scheduled to separately.
Sarah Gans:
That's great. How often should people be reviewing their home insurance policy? Is it in a set it and forget it type of thing or should you review every few years?
Michelle Hirsch:
We say every three to five years, but also if there's a specific event that could drive it. So you buy a new house, you're building a house, you have a teenage driver now, you bought a third car, you bought a vacation home, you're retiring, you're bringing on a nanny or an au pair, things that are changing in your life, that means that your risk profile is also changing. You've come into some assets, whether via inheritance or selling a business. You're now more collectible because you now have more assets or things are changing and you want to make sure that everything is protected properly.
Sarah Gans:
That's really helpful. I'd like to move to auto insurance, if you don't mind.
Michelle Hirsch:
Sure.
Sarah Gans:
So the car insurance was another area that I wanted to make sure that we were going over. I know during quarantine, I had lowered my limits to the state minimum because I wasn't driving anywhere. But now that I'm back to going out and about, I want to make sure that I'm properly covered. Liability insurance is so important with this coverage. So can you give us some recommendations on how much liability insurance you should have at a minimum.
Michelle Hirsch:
From a liability perspective, you never know what's going to happen in the car. You never know what's going to happen outside the car either, and the last thing you want to do is be sued because you injured someone and your policy not have enough to pay out that claim and then you have to come up with the money out of your own pocket. And that's what the liability protection, where that comes from. Typically, we recommend maxing out your liability, and in addition to that, getting an umbrella policy, which I know we'll get to. But that umbrella policy goes on top of your liability, on the auto, and on your home. And the other thing to note is that it follows you worldwide. So if you're on vacation and something happens and you injure someone or damage someone's property, it also covers all of your household members. So if your kid's playing sports and injure somebody else or they're driving someone else's car, all of these things, everybody within the house is going to be protected.
Michelle Hirsch:
And especially with COVID, now that we have people moving around, we want to make sure that if they're grown adult child has moved in with mom and dad, that they alert their insurance agent because now they're driving these cars of which they were no longer a listed driver because they were adulting and living on their own but now they're back in the house. So mom and dad need to call their insurance provider to let them know that they have an additional listed driver.
Sarah Gans:
That's really helpful. And having an umbrella policy in addition to that, I'm sure adds an extra layer of protection there.
Michelle Hirsch:
Exactly.
Sarah Gans:
So why would it be important to have an umbrella policy and who should be the individuals who own one?
Michelle Hirsch:
Every single human being should have an umbrella. I'm serious. We make people, all of our clients that don't want it for whatever reason, sign off that they didn't want it. You are so exposed by just being. It's not about being a bad driver, it's not about being a bad person, it's about being in the wrong place at the wrong time. I have so many stories of incidents where there was nothing wrong that this person did, it was just was bad luck and now they're on the hook because someone was injured and they got sued for millions of dollars and thankfully they had the umbrella and that's what paid them out. It's just you never know what could happen. And it's so cheap. I mean, you could get a million dollars of coverage for $125 for the whole year. So it's just so worth it to protect.
Michelle Hirsch:
How much umbrella is always a great question that people always ask me. Some people say a million over your net worth just to protect the assets that you have. We can right up to a hundred million in umbrella, but I actually don't really subscribe to that philosophy, because I think that it's more based off of your circumstance. So if we have two young professionals who just got out of college but got awesome jobs, they may have nothing but debt or may not have any assets yet, but their future earning potential is off the charts. So we need to make sure that they have an umbrella because the last thing they want is to have their wages garnished or file for bankruptcy early because they can't pay this claim.
Michelle Hirsch:
On the flip side, we could have a very, very wealthy family that is not going to buy a hundred million dollar umbrella. At some point, they're willing to self-insure. So it's more so about what makes you feel comfortable, how much you're willing to spend, and also what your exposures are. I always encourage my clients once they have teenage drivers to up their umbrella, just because. So it's so important and it's so cheap, and nobody's talking about umbrella insurance. So your mortgage broker forces you to get homeowners insurance, and you can't take your car off the lot without showing proof of auto insurance, but nobody's saying to anyone, "You have to have umbrella insurance." And that is, I think, the most important of all because all it takes is one issue and then you're just ruined financially for the rest of your life.
Sarah Gans:
Absolutely. And I know that you've shared with us some really interesting stories of things that you just couldn't even make up if you want.
Michelle Hirsch:
It's so true.
Sarah Gans:
It's so important to have that umbrella policy, because just as you said, you never know what's going to happen. So would you say for all of these different types of policies, is it better to bundle them or is it best to find the best carriers in each area?
Michelle Hirsch:
So you're going to get the best pricing, and just from the coordination of a claim I always recommend that, if you can, have one carrier for the whole thing. Sometimes it doesn't work out. Sometimes depending on your state, sometimes depending on the driving records, they may want your home and umbrella but not your auto. But it is always your first go at this, should always be, to try to get it all with the same carrier and bundle it together.
Sarah Gans:
I'm newly engaged and I live with my fiance. Should we be looking to combine our insurance or should we keep that separate until we get married?
Michelle Hirsch:
Absolutely. If you're living in the same household, that's really the defining characteristic. So even if you were just in a domestic partnership but you're living in the same household, you can combine insurances. The insurance always follows the title of the car. So I just had a client yesterday where they are engaged and they are getting married in July. They now are about to move into his place. And she is still on mom and dad's insurance on the car. She still lives at home. And so I walked them through that process of mom and dad are going to have to change the title of the car to her name and then we will quote the new policy with the couple, both cars and the home. So it's important to kind of just figure out where everybody is. But as long as they're in the same household, living in the same residence, we can make it work.
Sarah Gans:
That's great information. It looks like we have some work to do in our household. I really appreciate you taking the time to educate us on insurance. If anyone would like to contact you to know more, how should they contact you?
Michelle Hirsch:
Sure. So I give out my cell phone. Like I said, my grandfather started this business in the early so I grew up watching my dad and my grandpa taking calls on the weekends, on vacations, and just being very accessible. My cell is 330-606-8594, but you can also email me at [email protected] or you can visit our website, all kinds of ways to find me.
Sarah Gans:
It sounds like you're very accessible. So we certainly appreciate it. Thank you for all of our listeners joining us today for this episode of Sequoia Wealth Builders. If you'd like to discuss further or have any questions, please email me at [email protected]. Also, please subscribe to our podcast and share on social media. Leave us a comment and let us know what topics and segments you'd like to hear next. Until our next episode stay well and keep striving to build your wealth.
Disclosure:
Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC registered investment advisor. Registration as an investment advisor does not imply a certain level of skill or training.
