Jason Parker interviews Jeff Ogard with EHL Insurance regarding risk mitigation for property & casualty insurance, umbrella liability insurance and earthquake insurance.
Below is the full transcript:
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Announcer: Welcome back, America, to Sound Retirement Radio, where we bring you concepts, ideas, and strategies, designed to help you achieve clarity, confidence, and freedom, as you prepare for and transition through retirement. Now, here is your host, Jason Parker.
Jason: Seattle, Tacoma, Olympia, Gig Harbor, all the good people right here in Kitsap County, and for those of you tuning in from around the country, via iTunes, maybe you’re visiting us online right now at KKOL. Or, maybe you’re visiting SoundRetirementRadio.com. Thank you so much for joining us again this week. As always, it sure is a privilege for me to be the own that’s hosting this little program. It’s been almost 5 years now. I can’t believe how fast time flies. I feel like it was just yesterday that we started Sound Retirement Radio, but for our loyal listeners out there, thank you for making this one of the top podcasts in iTunes when you do a search for “retirement.” For those of you that have been so kind to reach out and contact me via email or telephone, thank you so much for that support.
It means the world to me, and you know, the more I hear from you folks, the more driven and passionate it makes me to just want to really bring experts onto this program that can add real significant, meaningful value to your financial life. I know the work that we’re doing is important. I know it has a significant impact on your planning. If you’re preparing for retirement, if you’re just recently retired, if you’ve been retired for a long time, welcome back to the program. I’ve got a great guest on the program. This is a gentleman we’ve had on in years past, and he really does have a unique perspective when it comes to risk management, and insurance.
Today, I have Jeff Ogard on the program. Jeff has 33 years of experience in this industry, 20 years on the wholesale or company side and 13 years on the retail or agency side. He holds the chartered property casualty underwriter designation and the CIC, Certified Insurance Counselor, professional designation. He and his partners formed EHL Insurance in 2001, and sold to Brown & Brown in 2012. He’s currently responsible for personal [alliance 00:02:16] insurance in EHL, that’s the Poulsbo and Port Angeles office and Brown & Brown, out of the Seattle offices. In 2013, Jeff was the president of Safeco’s national agency advisory council, and he’s currently winding down that responsibility. Jeff Ogard, welcome back to another round of Sound Retirement Radio.
Jeff: Thank you, Jason. It’s good to be with you.
Jason: Boy, you’ve got a lot going on these days, Jeff. How do you keep up with it all?
Jeff: I don’t get much sleep, Jason.
Jason: That’s not good. Well, I sure appreciate you taking time out of your busy schedule to be a guest here on the program. As always, Jeff, we want to add significant, meaningful value to our listeners lives, and the topic of insurance is a tough one, because frankly, most of us don’t really like paying for insurance, but I’d say most of us really dislike the consequence of not having the correct insurance in place. Would you take a minute and help our listeners understand, what’s really the difference between an insurance sales person, and a risk advisor?
Jeff: Well, basically, insurance sales people will pay more attention to that first component part that you’re description of consumer behavior is very, very common. At the time of purchase, what we care most about is low price, and at the time we have a prospective claim, what we care most about is broad coverage. insurance sales people will play on that desire for inexpensive, more than really look holistically at who are you as an individual, what have you accomplished financially, what are you likely to accomplish in years to come, and how do we best protect that? I’ve been very grateful for my partnership with you, because I believe that really, our industries are hand in hand. My job is to help people protect what they have accumulated, and your job, of course, is to not only protect it, but to grow it.
It’s a marvelous partnership, and so what we’re wanting to do is help people understand the areas where they are exposed, and then, what are the appropriate ways for treating that risk, and insurance is one of 5 primary techniques. There are certainly risks that should be avoided. There are risks that should be assumed. There are risks that we should transfer to other, perhaps by contract, and then there are risks that we should loss control, risks that we should manage. What can I do to reduce the likelihood of a claim? Or, should a claim happen, what can I do to minimize it’s impact? If we take stock of those non-insurance techniques, very often it helps us to go into the insurance discussion with greater piece of mind, knowing that we’re pulling on as many levers as we can. Risk managers simply is cognizant of all of those areas dealing with risk.
Jason: And not only cognizant, but also willing to say that insurance doesn’t necessarily have to be the solution in every instance, where you’re going to contractually transfer that risk. There are a lot of ways of looking at it, and just making sure that you’re coordinating that with the person’s goals, and their tolerance for risk. Some of us are more tolerant than others.
Jeff: That’s [crosstalk 00:05:46].
Jason: I tend to be one of these people. I’m a little paranoid, so I probably have more insurance than I really need in some cases. I wanted to ask you, and right up front, because this is Sound Retirement Radio, Jeff, as you know, is all about people who are within 5 years of retirement, and people who are already retired, and when you have had the good fortune of meeting with folks in that demographic, if there was just a couple of pointers that you could give people, things to really think about and watch out for as they’re going through this risk assessment process, is there any highlights, anything that really jumps to the front of your mind that people should be thinking about?
Jeff: Oh, absolutely, and this is not just true of people that are at or near retirement, but largely throughout the US population. It comes to liability insurance, most people are naked above about $100,000, and by that I mean, if we’re involved in a serious injury, automobile accident, or an injury at our home or rental property, or operating a watercraft, where someone is really badly hurt, a lot of the policies that we review stop once damage to any one person reaches $100,000 and if a jury were to give a reward of 7 or $800,000 and your insurance writes a cheque for 100,000 and walks away, then that leaves assets at risk. If you’re unable to write a cheque for 6 or $700,000, that shortfall, there are certain assets that can be attached, and certainly income that can be garnished going forward. Our job is to help people make sure that they run out of lawsuit before they run out of insurance, if at all possible.
Jason: Where would they want to check on what their liability limits are? Are they looking at home owners policy? Or, are they looking at an umbrella policy? Are they looking at automobile insurance? Where are they looking for those liability insurance limits?
Jeff: Your use of the word “umbrella” is really key. I believe most people who are at or near retirement, if they have assets that they need to protect, an umbrella is really key, and the fact is, 2% of consumers in the United States have an umbrella, which means obviously 98% don’t, and when you don’t, the first places you need to look are the top lines of the declaration pages on an automobile policy will typically that there’s 100,000 coverage for injuries to anyone person, not to exceed 300,000 per accident. We believe those numbers should be increased to $500,000 and then a personal umbrella set on top of that. A homeowners policy is going to have liability coverage. People on your property, the landlord protection and [inaudible 00:08:41] fire policies will have liability insurance. If you own a watercraft, if you own snowmobiles, recreation vehicles of any sort, all of those should have liability insurance on them, and we recommend that all of those be set at 500,000 which is typically the attachment point at which an umbrella policy will take off.
Jason: Okay. Great. That’s kind of a good segue for our listeners, a good place for them to start looking into this insurance. Make sure they have the correct insurance in place. A moment ago, you were talking about how what we do as investment advisors and financial advisors really works well with what you do from the risk assessment side, and I really think that’s true, Jeff, but one of the things especially, that I think is true, because of the way that you’ve structured your agency, and the way that you have the ability to really serve people well, I think that is invaluable. Sometimes when you work with these captive agencies, and they only have … It’s kind of the one trick pony model, where they only have 1 tool that they can draw from to help people with, that doesn’t seem like it really services peoples best interest. Would you just take a quick minute, before we segue into umbrellas coverage, and talking about the difference between somebody that works as a broker, and can represent a lot of different companies, versus the more of the captive brand?
Jeff: Well, certainly when we formed EHL Insurance back in 2001, we could have gone to any number of structures. You mentioned a captive agency, and that’s a situation where the insurance agency is an employee of an insurance company. This would be true of many of the large insurance companies that do a lot of national advertising. Either there’s no agent at all, or the agent only represents that one market. An independent agent or broker, technically represents multiple companies. We have a couple of dozen companies that we represent, and use 5 of them for preferred personal alliance. What it allows us to do is to analyze, number 1, is there something unique about the client that has a coverage need that one company is going to do a better job than another in serving? In Kitsap County, we have some rural [inaudible 00:11:06] people, that live on acreage.
They own horses, they may have a few head of cattle. They don’t have a commercial firm because there’s no money changing hands, but no every insurance company is going to be comfortable with that type of exposure, and they may not even have the coverages that really serve that client well. When we look at the value that a company can bring, the first factor we look at is coverage. Is there something that a company does particularly well that is a great fit for my client? Number 2, is underwriting efforts. How badly does the company want [inaudible 00:11:41]? If beat up an underwriter, and convince them against their will that they should take your business, and then you get into an accident, the likely response is going to be, “Well, I knew I shouldn’t have written that in the first place, so I’m going to send Jason a cancellation notice.”
Whereas, if the company really wants your business, and you get in an accident, the response is, “Well, that’s why people buy insurance. Of course there’s going to be a claim.” Coverage fit number 1, underwriting appetite number 2, and then 3rd, how is the company priced? We believe that we can when look at the confluence of those 3 factors, we’re able to find which company provides the greatest value, regardless of whether it’s the lowest price or not.
Jason: Okay, very good. With that, Jeff, I’m realizing we’re at that point where we need to take our first commercial break. We’ll be back in just a minute, and talk more about umbrella coverage. Allrighty, folks. Welcome back to another round of Sound Retirement Radio. I’m your host, Jason Parker, it’s my good fortune to have Jeff Ogard on the program with us. Jeff is a professional risk advisor, specializing in insurance and helping folks all through the beautiful Northwest here. Jeff, I believe you guys have some offices outside of Washington, too, don’t you?
Jeff: Oh, Brown & Brown nationally is headquartered in Daytona Beach, and has offices throughout the United States, as well as internationally. Larger brokers.
Jason: There you go. I’m just realizing, I forgot to share with you my joke, and I know all of our listeners, it’s the only real reason they tune into this program every morning, they just can’t wait to hear this joke every Saturday. Are you ready for this one?
Jeff: If you must.
Jason: Jeff, where do snowmen keep their money?
Jeff: I have no idea.
Jason: In a snowbank, of course.
Jeff: There you go.
Jason: You like these jokes about as much as my good friend Dean does. Nobody seems to like these jokes except for my 6 year old daughter at home. She always gets a kick out of them. So, we were just about to segue into umbrella liability insurance and you were mentioning that 98% of the population doesn’t even have this type of coverage. Take a minute, and tell our listeners a little bit more about what it is, and why you want to have it.
Jeff: Well, essentially your underlying policies, whether that’s your car insurance, your home insurance, your boat insurance, insurance covering your rental house, your motorcycle or other recreation vehicles, will typically cap out at half a million dollars, as far as the amount of liability insurance that’s available. If you have an accident that’s particularly severe, or if there’s an injury on a property that you own, where you are responsible for those injuries, there’s nothing stopping [inaudible 00:14:44] awarding more than half a million dollars, and when that’s the case, there needs to be an excess policy or an umbrella that’s going to sit on top of those underlying policies, and provide increments, generally of 1 million to 5 million dollars, and then if there’s need for more than that, we can look at high net worth markets, or excess liability markets that will provide layers in excess of 5 million.
Jason: What’s appropriate for most people that you meet with? What do you find is the right amount of umbrella liability coverage for most people? Especially retirees.
Jeff: That is a great question. It’s a very, very difficult one to answer, because it requires a crystal ball. I would tell you that most people will never have a claim that exceeds half a million dollars. The problem is, it could happen to any of us next week, and it’s very difficult, as a professional, to say, “I recommend that you have a million dollars because [inaudible 00:15:45] adequate job.” What we’ll typically say is that people need at least a million dollars, but that this is a question that’s very, very important, and we don’t pretend to have all the answers, and we recognize that every person that has a sizable nest egg is going to have a team of trusted advisors. There’s going to be a person such as yourself that handles the investments. There should be an estate planning attorney, there should be a tax professional, and typically, what I do is invite our clients to invite input from all of these people, and then we’ll go with the highest.
A lot of times, people will say, “Well, if my net worth is 2 million dollars, I want to have a 2 million umbrella. If my net worth is 4 or 5 million, I want to have 4 or 5 million dollars of insurance,” and that certainly is a place to start. The problem is, you have incomplete information. You don’t know what the worst thing is that can happen, for which you would be responsible. I have a friend who is a physician, and he was hit on his bicycle, and lost 20 years of income, and now walks with a cane, and his claim was probably worth 8 to 10 million dollars at the time that it happened, and yet, most people would never have an 8 or a 10 million dollar umbrella. It just kind of depends on who you are, what have you accomplished financially, what are you likely to accomplish in the future?
You could be a person with no net worth at all, in fact, you could have a negative net worth from having accumulated a lot of education loans for working your way through medical school, but if you’re now done with your residency and you’re beginning a practice as a brain surgeon, where you’re going to be earning very, very high income for the next 20 or 30 years, I would submit that you need a very large umbrella, something that [inaudible 00:17:50] that income stream is something that would be assessible for attachment in the event of a bad claim.
Jason: I’m curious to know, is it possible to protect yourself, like in this story you shared about your friend that was a physician that was hit? Chances are, the people that hit him did not have 8 to 10 million dollars of liability coverage, so is there anyway to have some kind of insurance in place to make sure that if something happens to you and the people don’t have the liability coverage that they should have that you have some way of protecting yourself in that event?
Jeff: Well, the cleanest way to have the protecting is that if you have a lot of assets that would be attachable, and you have income that could be attachable is to make sure that your liability is in tact. The attorney, though, is a wonderful source of strategies, certainly we’re seeing a lot of investment property put in LLC’s. We’re seeing assets that are [inaudible 00:18:50] trusts, and things that make it so those dollars are not attachable. The problem is, if you’re dependent on those assets for income, income can always be garnished.
Jason: On this idea of liability coverage, do you think people are setting themselves up for a greater probability of a lawsuit if they carry a lot of liability insurance?
Jeff: I don’t believe so. Although, I do hear that from time to time.
Jason: Do you get any better representation from the insurance company if you’ve got a lot … I mean, are they more likely to go to bat for you if they’ve got 5 million dollars on the line?
Jeff: Their job is to go to bat for you, the question is, if you have a case that’s worth 5 million dollars, and you only have a $100,000 of liability insurance, they’ll just tender their 100,000 and then basically excuse themselves, but I would say, let’s talk about a situation where you have a claim that might be worth a couple of million dollars, [inaudible 00:19:52] has half a million of underlying in a 1 million dollar umbrella. You would say, “Okay, 1.5 million in insurance, the case is worth 200,000. They have at risk half a million dollars.” The way that I would see this potentially happening is that the attorneys for both sides would sit down and talk about it. The first thing that they might do is disclose what the limits are and say, “This is your lucky day, that most people only have $100,000, in this case there’s 1.5 million, and if you’re willing to settle this in short order, we will tender the whole 1.5 million and save everybody the lawsuit.”
On the other hand, if you and your client want to go after our client personally, for that other half a million, we’re going to fight you. You might spend 2 or 3 years in trial, and there’s no guarantee that you’re even going to get the 1.5. There’s certainly negotiations that can take place and I believe that the client is best served by making sure that they at least have that first million locked up in the umbrella. It’s just going to give the adjuster and … Excuse me, the attorney representing the client a better chance of getting a settlement. If you have a person with a net worth of 4 or 5 million dollars, and they don’t have an umbrella, then there’s going to be much more impetus to go after them individually, and that’s what we want to avoid.
Jason: When we think about liability insurance, I think most people automatically kind of think of a car accident and hurting somebody in your automobile. What are some other examples of things that you want to have liability coverage against?
Jeff: Boating accidents can be [crosstalk 00:21:52].
Jason: You keep bringing up that boating thing because I bought a boat this past year, huh?
Jeff: Your little fishing boat I don’t think is going to cause a lot of problems.
Jason: It’s causing me a lot of headaches. I’m not catching enough fish. That’s the problem.
Jeff: If your towing a water skier at 40 miles an hour into the sun and there’s glare on the water, there could be somebody else down, and if you run over them and the propeller severs a limb, we’ve seen claims where people bleed to death before they get to the hospital. Those are very dramatic accidents. There can be injuries on a piece of property that’s owned. If a person is negligent in getting ice off a wok, or a deck that has moss built up on it and somebody has their feet go out from under them and they crack the back of their head, and they’re hurt very badly, those can be bad cases. We’ve seen claims where people have hot tubs, and the lids are not secured, and a neighbor child or a small child of a guest falls into it and drowns. These are situations that are absolutely life changing for families, and can result in very steep awards.
Jason: Wow. Those are some great examples. Horrible examples, but good examples of other reasons why you have liability coverage, beyond just worried about a car accident, getting into an accident and hurting somebody there. Well, that’s very, very enlightening, Jeff. Since we’re talking about umbrella liability insurance, and I personally purchased one of these policies after you advised it, and I was amazed at how little this type of insurance costs. Maybe you could talk just for a minute about what people should expect to pay for an umbrella coverage?
Jeff: It blows peoples minds. When you’re spending perhaps a couple of thousand dollars for auto insurance a year to learn that you can add a million dollars for liability for less than $200 a year is astounding. The reason that umbrellas are so expensive is with the vast, vast majority of claims are settled for under $500,000. When your umbrella has high attachment points, such as a half a million dollars, where the umbrella starts, the claims frequency is going to be very low, and it’s therefore inexpensive if they add that extra million dollars. It’s an exposure based policy, meaning the more cars you have, the more properties you have, the more boats, the more rentals, the more toys you have, the more expensive the policy is going to be, but it’s also a very good thing that it will expand and contract as your exposures change.
Jason: That is a good thing. Very good, Jeff. I just realized we’re at that point here where we need to go ahead and take a quick commercial break. When we come back, I want to talk to you some more about earthquake insurance. Allrighty, folks. Welcome back to another round of Sound Retirement Radio. I am your host, Jason Parker. As always, I sure appreciate you joining us on this program, and I love the feedback you send me, whether it’s an email, or I remember a couple of weeks ago, we had a gentleman pick up the phone and call me, I think he was from Kentucky. That just absolutely made my day. I love hearing from our listeners. The other thing I want to remind you, a couple of things. First of all, if you haven’t visited SoundRetirementRadio.com, we do have a website set up specifically just for the radio show, so you can listen to us online, and you can listen to a bunch of past episodes.
We have, I think, nearly 70 episodes available on a whole bunch of different topics, so if you’re getting ready to retire, a lot of resources available for you there. Also, you can listen to us a live streaming every Saturday morning from 8 to 9am on KKOL, so you’ll notice we take commercial breaks, and for those that listen to the podcast, you don’t have to listen to those commercials because you’re listening to the podcast, but if you do catch us live on the radio, we take those commercial breaks so that our radio folks can enjoy some sponsorship on that side. With that, I wanted to get back to Jeff. We’ve got Jeff Ogard on the program. Jeff is a professional risk advisor. He’s one of the folks in our community that I’ve referred a lot of people to, to get a second opinion on their risk exposure, and we just talked about umbrella liability coverage and why that’s so important, and how inexpensive it is. I mean, if you don’t have coverage now, definitely worth looking into.
Jeff, I wanted to ask you next about earthquake coverage. Just the other morning, I was laying in bed, and at 11:55, I woke up, just out of the blue, and as I started to try to fall back to asleep at like 11:57, all of a sudden the little change that hangs next to my lamp started “click, click, click,” clicking on the porcelain, and I was like, “What is going on?” I started searching and sure enough, we had a small earthquake. It was just a small, little 3.5 on the Richter scale or something. Very small earthquake, but kind of captured my attention, made me think more about earthquake insurance, so talk to our listeners a little bit about earthquake insurance, what we should be thinking about there, and how we might plan for something like that.
Jeff: That’s a great question, Jason, and it’s important, I think, that people understand that a vast, vast majority of homeowners policies do not include coverage for earthquake. The policies do not cover every bad thing that could happen, and earthquake, landslide and flood are 3 very common perils that are either not available at all, or are going to have to be purchased via endorsement, or even a separate policy. As I look at earthquakes in the Pacific Northwest, I don’t think there’s any thing that’s happened in the last 100 years that if we had a repeat of that, would be an event that would cause most people to have need for the coverage. We had very measurable earthquakes in ’49 and ’65, and ’01, and the damage did not leave the Puget Sound region with majority of houses off foundations, or even a number of houses off the foundation.
The 2001 Nisqually quake, I’m aware of 1 customer that I’ve talked to that had any earthquake damage, and it was because his contractor forgot to compact the soil underneath his foundation. The reason that people are concerned about earthquake, and the reason that insurance companies largely don’t want to provide earthquake insurance is fear of what geologists call “the big one,” which is a subduction zone earthquake. The quake in Japan a few years ago that caused those tremendous tsunamis that we saw on TV was a subduction zone quake. The one in Anchorage, Alaska in the mid 60’s was a subduction zone quake, and Chile has had a couple of them. The Pacific Ring that runs from Chile up to Alaska, over to Japan, and basically circles the Pacific Ocean is seismically potentially very active for this type of an event, and if this were to happen in the Seattle area, we would be talking a magnitude above 9, and one that might be shaking for a minute or longer, which would be an eternity.
We would expect to have houses completely off the foundations, and what’s really sad in this case, if you have a home that is properly insured, say for $300,000, meaning that if you had a fire and your home was destroyed by fire, and your house is the only 1 that is destroyed by that fire, that a contractor would be able to rebuild for $300,000, if you have earthquake insurance on that house, and coverage is capped at $300,000, you might find that in an event where much destruction is widespread throughout the region that it could easily cost $500,000 to rebuild that house. That’s simply because all of the building materials are spoken for, and all of the contractors are gainfully employed for the next few years. We’re now needing to bring in materials from outside the area, we’re needing to bring in labor from outside the area, and by the way, there’s no place for these people to stay. We have FEMA trailers all over the place, and just widespread debacle, and costs go up dramatically.
People will ask, “What are the factors that would cause me to want to buy earthquake insurance?” The number 1 factor, I think, is simply financial exposure. If you have a net worth of 2 million dollars, and 1 million dollars of that is the equity in your home, maybe it has a market value of a million, you’re free and clear, half your net worth is tied up in that home, and that would cause me to be much more concerned about that than if I had a half million dollar home with a $450,000 mortgage, with a few million dollar net worth. It’s a very small percentage of who I am. I have some very wealthy people that I represented who are free and clear on their home, and they’re not the least bit concerned about it, because they have another home in Sun River, and anther one in Palm Desert, and if this one’s destroyed, they don’t want to live here while the place is a mess, and upside down, so they just walk away.
The number 1 factor, I think, is just equity in the property, and what percentage of your net worth is tied up in that equity. Beyond that, there are certainly factors that are going to cause earthquake to be a bigger concern. If you have [brick 00:32:30] reconstruction versus wood frame construction, if you can get the earthquake, it’s going to be about 4 to 5 times more expensive, simply because brick does not move. It doesn’t bend with the shaking. It’ll tend to crumble more quickly. If your house is older than about 1975, you’re going to find that earthquake insurance is very difficult to get, unless you can prove that your has been retrofitted. In the mid to late 70’s, the building codes in our area were strengthened greatly. My home was built in 1998, and my contractor has these massive bolts coming out of the foundation, about every 10 inches and the foundation of the home, the framing of the home is literally bolted to the foundation.
n older construction, that may not be the case. They could just simply be toe-nailed in, and those houses are much more readily to slip off the foundation. If you’re on a steep hillside, you’re going to be more exposed than if you’re on a flat lot. If you have a 3 story home with a basement, that’s going to be much tippier than if you’re all on one floor. Those are some of the factors that people will consider, in terms of how exposed they think they are.
Jason: I think that, what you just explained there is a great reason to have a risk advisor, somebody that you can turn to and help get some guidance on, because there’s a lot of different variables that go into this. Home equity, what’s the home structure? When was it built? What’s the likelihood of needing to protect that asset? You just named off a lot of different reasons, and then, how much coverage do you get? Obviously if it’s a big quake, and your house is worth 300,000, but it’s going to cost 500,000 to rebuild it, well, you don’t want to be under insured with your policy at that point, and that is a big problem. One of the things I hear a lot of times, not necessarily about property casualty insurance, but about other types of i5 like long term care i5, people say, “Well, my mom or my dad had that insurance and it really didn’t cover all of their expenses.”
Their issue was that their mom or dad didn’t buy enough insurance, that they didn’t have enough coverage. The balancing point, Jeff, is none of us want to be insurance poor. We all have lives we want to live, and things we want to do, and ways we want to spend that money other than buying insurance, so boy, you’ve really got to strike a happy medium there with what you’re going to be comfortable with from a risk standpoint, and what you really feel is absolutely necessary for insuring again.
Jeff: Jason, there’s a really good answer to that question when it comes to insuring against earthquake. If you have a house with a reconstruction cost of 300,000, you can’t buy a 500,000 policy, but what you can do is buy a 300,000 policy with perhaps a 150% or 200% extended rolling option on it. Those are the types of things where if you’re dealing with an independent agent, that again has a number of different companies they’re working with, they’re all going to be structured different in terms of what your features are, and if someone is really concerned about earthquake and lives in this region, they’re going to be recommending companies that are going to have features. One of our companies has a 200% option, which would mean that if the house is insured for 300,000, they’ll pay up to 600,000 to rebuild it. We have another company that’s a high net worth market where it’s uncapped. If you have a 1 million dollar policy, and it costs 3 million to rebuild your house, they’ll pay 3 million.
Jason: Wow.
Jeff: Those are the types of features that can be used when you’re concerned about catastrophic replacement costs, which is exactly what we’re talking about here.
Jason: All right. So, you know, I have some more questions I want to ask you, specifically for our listeners out there. Maybe some tips on how to consider reducing their overall insurance cost, if you have any ideas there, and of course, there’s a balancing act here between cost and coverage. We want to make sure they have the right coverage at the right price. That’s one thing I want to ask you about, and then, the other thing is just some general guidance on some things like homeowners insurance, and car insurance. We’re going to be back in just a minute, Jeff, and we’ll go over some more of these items. Until then, we’re going to take a quick break. Allrighty, folks. Welcome back. This is Jason Parker, the host of Sound Retirement Radio. I sure appreciate you tuning in every Saturday morning for my corny jokes. I know that’s the only reason y’all join me, and if you’re tired of hearing my bad jokes, just email me over a good one. I’ll share it, as long as it’s clean, and family friendly, and appropriate.
If it’s not, well, I’ll probably get a good chuckle out of it. The email address, the best way to contact me is info@parker-financial.net. That’s info@parker-financial.net. I have Jeff Ogard on the program with me today. Jeff is a professional risk advisor. He’s insurance licensed, he holds the chartered property casualty underwriter designation, as well as the certified insurance counselor designation. Jeff, I wanted to ask you for some tips for our listeners on ways to reduce overall insurance expense, but before we get into that, there’s going to be some people listening to the program that would probably like to know how to get a hold of you if they’re interested in consulting with you about their insurance. What’s the best way for people to contact you today?
Jeff: The simplest is just to email me at jeff@ehlinsuance.com.
Jason: Okay. That’s the website, too? EHLInsurance.com?
Jeff: Yes, it is.
Jason: All right. Do you have any tips for our listeners? Ways that they can consider maybe reducing their overall insurance costs.
Jeff: Absolutely, we do. Typically, when I mentioned that 98% of the people don’t have an umbrella, and we’re talking about needing to raise their limits, that tends to make insurance a little more expensive, so at the same time, we’ll be looking for areas where they’re spending money on insurance that maybe not be getting them great value. First of all, it’s going to be the whole area of deductibles. We still see people with a $500 deductible on a homeowners policy, and for anything new, we’re tending to quote 1000 at the absolute minimum, and in many cases, 2500, 5000 or $10,000. If you think about it, if you have a $500 deductible instead of a $2500 deductible, the difference in premium, simply on your homeowners policy, in most cases will pay for the umbrella all by itself. In the case of car insurance, we see situations where people have a vehicle that might be 10 years old or older.
It’s depreciated most of their value. If they were to be in an auto accident where the car is totaled, they might only get a couple of thousand dollars for the car. It doesn’t make sense to carry collision insurance on a vehicle that has depreciated most of its value. People will say, “It’s still my car, and it’s valuable to me, what if I’m not even at fault in the accident?” There’s a very, very inexpensive coverage called “uninsured motors property damage” that we will always put on, not a policy. It can be as little as 5 or 6 dollars for 6 months, and it will protect the value of their car from somebody who hits them and who has no insurance. Those are the 2 biggest, I think, is looking for higher deductibles on coverages that we need to keep, and then getting rid of the coverage that is protecting assets of very low value.
Jason: Those are some great tips. Let me ask you on homeowners insurance, where you’re talking about going from maybe a $500 deductible to 1000, or 2500. What kind of claims do you see the most of on homeowners insurance?
Jeff: The homeowners policy is essentially 4 or 5 different policies all stapled together, so losses come from a variety of causes. Theft is certainly a major cause of loss. This could be someone has items that are stolen while they’re traveling. It could be items stolen out of an automobile. It could be a burglary where somebody breaks into a house and empties its contents. We’ve seen claims where a thief will back a moving van up to a house, they’ll be dressed like a moving company, the neighbors think that they’re neighbor is moving away, and what actually is happened is that they’re being robbed. Water damage is very prevalent. These can be from a nuisance to a total loss. I’ve seen situations …
Jason: Are those …
Jeff: … Where following …
Jason: Water damage, is that typically like a dishwashers, hot water, heaters, toilets, those kinds of things?
Jeff: You bet. Particularly with retired people. Let’s say that you have a place in a warm climate where you want to go to fly out, and so you’re away from your home for a couple of months. We have a very, very cold snap and our pipes freeze and then when they thaw, they burst. I had a claim once on a home where the people were snowbirds, and a jogger along a golf cart path noticed in looking at the basement of a 1 story house with a daylight basement, that the water was half way up the sliding glass door.
Jason: Oh, my goodness.
Jeff: That was a ruptured pipe that had been running for over a month, and that house had to be bulldozed because of the mold inside. Water damage can be a couple of thousand dollars. It could be all the way up to something that’s really dramatic. People that own dogs, or horses. Horses can kick people, dogs can bite people, and these can be from just a few hundred dollars, to hundreds of thousands of dollars in the liability area. Certainly fire and then any manner of weather loss, severe wind storm. As you look in the Midwest, towns in Oklahoma that half of them are decimated from tornadoes. Things like super storm Sandy, and in Washington, of course, we’ve had wildfires, even in Mason County, and in the North Cascades, Lake Chelan and Spokane, and [Penguin 00:43:32] Valley. There have been situations where fires burn out of control, and will destroy several houses at a time.
Jason: You know, that brings up a good point. Some people have been griping that their homeowners rates have gone up considerably in the past 10 years. What’s that? Is that due to some of these disasters that you’ve been talking about?
Jeff: It’s simply a reflection of the fact that the industry in the United States has made an underwriting loss in something like 16 of the last 17 years. It’s been very difficult for most companies to raise rates fast enough to stay in front of the claims that are being paid. As a result of that, even if the savings of going to a higher deductible don’t seem significant, we think it’s very, very wise that people be willing to accept a greater degree of risk. It would be very unwise in this homeowners market to file a claim for 8 or $900 in damage. Let’s say you have a $500 deductible, and a suitcase is stolen, and there’s maybe $1400 in total value. If that’s me, I’m going to write the cheque for $1400 to replace the stuff and not go to my insurance for that. They’re going to be surcharges for claims that do happen. The industry is wanting to make sure that people that have no claims are charged the very least.
It’s interesting, just as in the case of automobile accidents, people often think that when their rates go up following a claim, the companies trying to get some money back, and that’s absolutely the farthest thing from the truth. Actuaries are looking through the windshield, rather than their rear view mirror, and what they understand is that if they have 1000 homeowners that have a claim, and 1000 that don’t have a claim, they’re going to have more claims in the future from the group that’s already turned one in, and so the surcharge is merely a way to obtain greater revenue to pay a greater frequency of claims. The proof of this is the fact that the surcharge for a $1000 claim is the same as the surcharge for a million dollar claim.
Jason: Wow. Hey, I just thought of something that some folks I know ran into recently. They put their house on the market, they were selling their house because they were moving from their house into an independent retirement living community. When they sold their house … I’m sorry, when they moved out of their house, they hadn’t sold it yet, so they kept the house on the market, and they moved into this independent retirement living community. Their insurance company caught wind of the fact that they were no longer living in the house as the primary residence, and cancelled their insurance coverage. Have you heard of this happening before?
Jeff: Oh, it happens all the time and it simply is because a homeowners policy is intended for a home that we own, where we are living there as our primary residence. As soon as that’s no longer true, then that home is no longer eligible for a homeowners policy. The situation …
Jason: Is there anything people can do if they’re in that … They’re getting ready to … In that same boat?
Jeff: Number 1 is keep it furnished. Don’t let it be completely vacant. Maybe split your time between the retirement independent living and the main house. If it’s a situation where they don’t have that flexibility, maybe they need round the clock care, certainly having a renter in the place is a much better exposure. There’s just a lot more vandalism, and a lot more water damage, and things that happen when a home is obviously vacant.
Jason: Is there any insurance that you can buy on a house, a homeowners type of policy once you move out? Is there unoccupied homeowners insurance?
Jeff: There is, and it’s expensive and the coverage is not very broad. We try to keep the homeowners policy enforced as long as possible, provided that maybe the clients family is helping watch the place, and we know that it’s not presenting an undue exposure, but to go from a primary residential homeowners policy, to rental house insurance is not expensive, and if it is possible to have a tenant in there while the place is for sale, that is certainly better than having it empty.
Jason: All these little nuances that come up, and I tell you, when you’re trying to figure out the answers to these questions, when you have somebody good that you can turn to, that can help guide you through it, folks, I’ve got to tell you, I’ve sent a lot of people to Jeff to help answer some of these questions. Jeff, as the busier you’re getting these days, are you still going to be available to take one on one phone calls for people in our community? Or, should they expect to be working with one of the folks that you’ve hired and have trained?
Jeff: I meet one on one with people every day, Jason, and I have staffs of people in both offices that are very, very capable of having the same discussions.
Jason: Very good. Well, we sure appreciate the work you’re doing. One more time, if you’ll just let our listeners know how they can learn more about the work that you guys do, and contact information in case they’d like to speak with you.
Jeff: By email, jeff@ehlinsurance.com, and toll free is 800-929-166-9. That’s EHLInsurance.com
Jason: 800-929-166-9.
Jeff: Yes. That’s the 800 number.
Jason: Jeff, any final thoughts here as we wrap up the program this afternoon?
Jeff: Well, just thank you, Jason for your care and concern for your clients. It’s been a privilege to work with you, in knowing that you put people ahead of profit and we do the same thing with our work. We frankly get more referrals from people that we don’t sell insurance to than those that we do, because if we don’t have something that’s going to make their value improve, we don’t recommend product, and that tends to surprise people.
Jason: Yeah, and I have appreciated that. Again, thank you so much for the work that you’re doing, and thank you for the compliment, and for taking time out of your busy schedule to be a guest on the program.
Jeff: Any time, Jason.
Jason: Take care, Jeff.
Jeff: Bye bye.
Jason: There you have it, folks. This is another round of Sound Retirement Radio. As always, I hope that the information that we bring you today has added some real significant, meaningful value to your financial life. If so, I’d like to hear from you. Again, go ahead and shoot me an email at info@parker-financial.net. Visit us online at SoundRetirementRadio.com, or visit my blog which is SoundRetirementPlanning.com. Until next week, this is Jason Parker signing out.
Announcer: Information and opinions expressed here are believed to be accurate and complete. For general information only, and should not be construed as specific tax, legal, or financial advice for any individual, and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program. Parker Financial, it’s representatives or its affiliates have no liability for investment decisions or other actions taken or made by you, based on the information provided in this program. All insurance related discussions are subject to the claims and ability of the company. Investing involves risk. Jason Parker is the president of Parker Financial, an independent, feed based wealth management firm, located at 957 Washington Avenue Northwest, Silverdale, Washington. For additional information, call 1800-514-5046, or visit us online at SoundRetirementPlanning.com.
