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Are You Overpaying to be Underinsured?

Technically, I’m a millennial, though I loathe the designation. I was born in 1983, so I barely made the cut for some demographers’ broad, sweeping designation of my generation. Yet, despite my “youth,” I can barely check my email account, and my use of emojis is not “lit,” as the kids say.

Seriously. Until about 10 days ago, I thought the designation “SMH” meant “so much hurt.” One of my younger millennial friends pulled me aside to tell me it actually meant “shaking my head.” Oh; that makes so much more sense now.

Yet, despite my uncanny inability to connect with those young whippersnappers who need to get off my lawn, I often find myself actually SMH when I’m reviewing a potential client’s insurance. Sometimes it even makes me LOL (see what I did there?). Allow me to explain.

A few months ago, we came across a recently retired business executive with a high net worth. His insurance had not been properly reviewed by his agent in at least a decade. When we looked at his current coverage, it was mind-numbing. Meager liability limits on his automobile coverage, and no umbrella policy to speak of. Meanwhile, this gentleman’s main consideration when having his insurance reviewed was making sure his deductibles stayed at $500 or less.

We’re not talking about a meager income earner, forced to live paycheck to paycheck. No; think Don Draper, or Denny Crane (below) from Boston Legal, or Warren Buffett (okay, maybe not Warren Buffett). But still, this guy had some cheddar, yet his insurance coverage was barely appropriate for the local Wal-Mart greeter.

Think about it this way. For a high- (even medium-) income earner, a $500 loss is a bad day, maybe a bad week. But it doesn’t ruin the whole month, and certainly not the whole year. Why, then, would you want to pay big bucks for a $500 deductible? Particularly when doing so would increase the temptation to file a claim for every nickel and dime accident to your home and/or vehicles (which, in turn, likely would raise your rates at renewal)?

Instead, at The American Insurance Group, we believe a significant part of our work is to educate our clients on when (and how) insurance should be used. Remember – it’s insurance. It’s not a repair services vending machine. The penultimate purpose of insurance is to protect against catastrophic injury, property damage, and liability. So, we want our clients to use it that way, and we’re not afraid to tell them why we believe so strongly in this philosophy.

So, what was the answer for Mr. Top Executive? First, we increased his auto liability limits (both for bodily injury and uninsured motorist injury) from $300,000 to $500,000 per accident. We raised his deductible up to $1,000, both for comprehensive and collision. And, most importantly, taking the savings realized by slightly increasing the deductibles, for just a few hundred bucks a year we added a $3 million umbrella policy that covers over and above the underlying liability limits on both of his homes and his autos.

You see, when your agent tells you he can save you money, he may be right, at least until you face a catastrophic circumstance that leaves you paying out of pocket because you didn’t have enough coverage to begin with. It’s a shame, and it’s bad education.

So, are you overpaying to be underinsured? We hope not but, unfortunately, have realized that this has become the norm for most. We’d love the chance to help you correct that, to make sure you are adequately covered, to welcome you to our family. And, ultimately, to leave you in a position where you aren’t SMH.

                                                                                                                                                           

The American Insurance Group is a locally-owned, independent insurance agency in downtown Chattanooga. The Agency provides risk-management solutions for businesses and individuals. You may find more information about us at www.theamericaninsurancegroup.com. Please contact us via email at sales@insurancegroup.us or via telephone at (423) 362-4166.

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