Are you wisely protected?

DATE | 06/06/16
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Insurance consumers fall into one of three categories. Which one are you?

While nearly everyone THINKS they are Wisely Protected, few actually are. If you’re like most people who treat auto and home insurance like a commodity—or one-size-fits-all—you risk leaving yourself (and your family) exposed to financial loss or purchasing coverages you don’t need. Here’s how to get wise with insurance.


Principle #1: Buy value, not price

Mark Dannehl is a long-time Personal Insurance Consultant with Member Benefits who helps people evaluate their insurance needs and purchase insurance.

Mark illustrates why it pays to focus on value. “Recently, I spoke with one of our members. She said, ‘Mark, I went online and got a quote that could save me over $500 a year. That’s savings I don’t think I can pass up.’ She e-mailed the quote so I could take a look. It had only about one-tenth of the liability coverage that she had with us. Also, other coverages she had with us weren’t included in the online quote—thus, the lower premium.

“I explained that she would be short on liability coverage, which would leave her exposed to loss. Plus, the lower liability limits would make her ineligible for umbrella insurance which requires underlying liability limits of $250,000/$500,000. This is especially important for her as she has a youthful driver on her policy. After we talked about the differences and she had all the information she needed to make a final decision, she said, ‘You know, that $43 per month of savings isn’t any savings at all.’”

Fortunately, she called us first and made an educated choice. Unfortunately, we have a lot of people jump at price without looking deeper. It’s becoming more of an issue as insurance is marketed as a commodity. However, at Member Benefits, we strongly believe it should not be bought that way. Your insurance needs are not the same throughout your life nor are they the same as your neighbors’.

Mark adds that while coverage is a huge factor, you need to keep in mind that when you buy insurance you are essentially buying a legal document—a contract. “The fine print in the document will make all the difference when you file a claim. And, as part of the deal, you get the people who will interpret the document and decide whether they will pay your claim or not.”

Principle #2: Maximize your insurance dollar

If you’re going to spend money on insurance, get the most you can get for your dollar.

“Let’s say you have $130 to spend on insurance,” says Mark, “and you have two choices:

  1. You can use the $130 to cover the possible loss of $150–$400, or
  2. You can use the $130 to cover a possible loss of $150,000.

“Obviously 2 is the better value. But in reality, most people ask us to do 1. People tend to think about risks they have experience with or can conceive of—like the fender bender or losing your mobile phone. The risk of catastrophic events is often dismissed because they happen less frequently even though they can be far more financially devastating.”

Mark shares another example. “A member e-mailed me their policy and asked if he could reduce his premium by changing coverages. He had good coverage but his deductible was pretty low. Moving the deductible a bit gave him the savings he was looking for without increasing his risk for large financial loss.”

Principle #3: Insure for the catastrophic—it’s the real reason we have insurance

Umbrella insurance is overlooked by a lot of people, yet most financial planners consider it a must-have. Many people think it’s only for the wealthy and that it’s expensive insurance to carry, but it’s actually very affordable.

Do you have a car? Teenage driver? Watercraft? Use the Internet? These are four of the biggest causes of liability losses. You don’t have to do crazy things to be at risk—and you don’t have to be a millionaire to be sued like one.

Mark shares a personal experience about the significance of this principle. “Five years ago, my wife Deb was driving home from work in road construction. She looked over her shoulder to change lanes and the car in front of her stopped. She rear ended the car. The police came and Deb was cited for following too close. After the reporting was done and insurance information was exchanged, the woman she hit drove away.

“About five weeks later, we received a letter from a well-known personal injury law firm in Milwaukee wanting $350,000 for injuries to the woman in the car. We had $250,000 liability on our policy, so we were $100,000 short. Thankfully, our umbrella policy would’ve kicked in to cover the excess as well as the legal defense fees if we were found liable. As it turned out, the claim was not justified and the umbrella didn’t come into play, but if it had turned out differently, we would’ve been financially devastated if not for the umbrella coverage.”

Lastly, scheduling items like electronics, collectibles, and jewelry isn’t a bad thing, but if you are doing that at the expense of coverage for the catastrophic loss, it isn’t the best use of your insurance dollar.

Not sure which kind of insurance consumer you are?
Let us take a look at your needs and your existing coverage. If you’re already wisely protected, we’ll tell you! If not, we’ll recommend changes and coach you to be a better insurance consumer. Call 1-800-279-4030 for a free consultation or schedule an appointment online.

>> See an example on how spending money on the right things can help you be Wisely Protected.