Today’s world presents new and old dangers to individuals and families. Information technology, now essential to our work and private lives, makes it easier than ever for bad actors to reach out and harm us. A parade of novel financial products bid us to invest, lest we miss out on the next big opportunity, but the modern, algorithm-driven market may tank for reasons the average investor is not equipped to understand, let alone predict. At the same time, man is still subject to the same natural disasters and many of the same physical ailments that threatened his ancestors.
There are tools and methods to moderate these uncertainties. Have you taken full advantage of the protections available to you? Consider the following risk areas.
Property and Casualty Insurance
When was the last time you had your insurance plan evaluated?
As years roll by and people accumulate more material wealth, they simply have more to lose, and they ought to periodically evaluate whether their coverage is adequate. Consideration should be given to whether one’s property is adequately covered and whether there is sufficient liability coverage in light of one’s current net worth. Settlement of a negligence lawsuit or payment of a suit judgment should not alter one’s standard of living if there is sufficient liability coverage.
Do you have adequate coverage?
Because persons with high net worth often have unique high-quality properties (e.g., specialized architecture and superior building materials), the appraised value (and repair costs) are far higher than typical home insurance coverage amounts. The contents of such homes, such as wine, art, or jewelry collections, may well not be adequately covered. Beyond the dollar amounts that policies offer for the replacement or repair of property, the property coverage is only adequate if recovery may be gotten in the event of all reasonably conceivable sources of damage: wind, water, fire, and theft, to name a few.
Do you own umbrella insurance?
Umbrella insurance is the second tier of liability insurance that becomes effective when the limits of one’s underlying policy have been exceeded (e.g. one’s homeowner policy). Typically umbrella insurance is less expensive if purchased from the same insurer that gave the first tier of coverage. Umbrella insurance is especially important for high net worth persons who are likely to be sued, such as if they are a landlord, coach children’s sports, serve on the board of a nonprofit, volunteer, regularly post reviews of products or businesses, or participate in sports that could easily injure others, such as skiing, surfing, or hunting.
Do you own uninsured and underinsured motorist coverage?
Uninsured and underinsured motorist coverage is designed for when a person is negligently injured by another who does not have adequate liability insurance to make recompense for the damage and injuries he has caused. In such an event, the injured party could rely on this form of insurance to make himself whole again. Consider that if a party is injured by a negligent driver who does not have insurance, the injured party’s own health insurance certainly would not compensate him for lost wages or pain and suffering: some forms of uninsured motorist coverage do just that.
Are your policies coordinated, or do you have gaps in coverage?
Since people typically accumulate real estate and other property over an extended time period, it is not unusual for them to have taken out policies on those respective properties with different insurers. Coordinating the protection of one’s properties under one insurer may decrease the overall cost of protection. Additionally, this arrangement promotes superior administration for both the insured, since there is only one number to call to check on any property coverage, and the insurer, since the agent would then be aware of the client’s entire property portfolio rather than working piecemeal. By working with one insurer, policy periods can be arranged to all start, end, and be renewed on the same dates, making gaps in coverage less likely to occur.
Do you understand your current health insurance coverage?
For instance, the insured should understand the interplay between a plan’s premium and deductible; typically, a plan with a higher deductible will have a lower premium. The insured should be aware of the distinction between a plan’s deductible and its co-pay: a co-pay is a fixed amount that the insured is to pay on his own for a given service (e.g., a check-up with the insured’s doctor); the deductible is a fixed dollar amount that the insured is to pay within a defined time period (e.g., a year) before the insurer starts paying for health care services. Depending on the details of one’s health insurance plan, co-pays that the insured pays may or not count toward the deductible.
If you are on Medicare, do you have the proper supplemental coverage?
Though Medicare is a government program, Medicare Supplemental coverage is gotten through private companies. Medicare Supplemental Insurance, also called MediGap, can be used to defray costs that standard Medicare would otherwise require the insured to pay, such as co-pays and deductibles. The availability of MediGap plans varies by state, so the Medicare recipient would need to research what is available in his locale.
Do you have a suitable drug plan?
Forty percent of Americans who are over age 65 take five or more medications daily. Medicare parts A and B (so-called “Original Medicare”) typically do not cover the cost of medication. Drug coverage may be gotten through Medicare either by enrolling in a stand-alone plan (part D) or a Medicare part C plan, combining medical and drug coverage. When choosing a Medicare drug plan, the insured should check the plan’s list of covered medications, called a formulary. Covered medications will be arranged by tiers, with the insured paying varying amounts for a medication depending on its tier level.
Do you have a long-term care plan?
Roughly seventy percent of Americans aged 65 and older will require some form of long-term care during their lives. Typically, long-term care is not covered by Medicare or standard health insurance plans. Long-term care plans can be especially expensive when they are purchased by persons of advanced age. It is advisable that persons between the ages of 45 and 55 look into purchasing long-term care insurance as part of their overall retirement plan.
Do you have a financial plan that covers the cost of long-term care?
Long-term care may be very expensive: it is not unusual for the cost to exceed $100,000 per year. It is easy to see how an extended need for such care could swamp the finances of most American households. Individuals and couples should evaluate their finances while still working to determine whether it will be appropriate to budget money to pay for long-term care (to “self-insure” ), purchase long-term care insurance, or adopt a hybrid approach.
Do you have long-term care insurance?
Long-term care insurance can cover the cost of in-home care, assisted living, adult day care, hospice, nursing home, memory facilities, and also a home modification to accommodate disabilities. A traditional long-term care policy entails premiums that are paid periodically and not returned if coverage is not used; however, some plans offer a return of premium riders, by which the insured may designate a beneficiary to receive the difference between premiums paid during the life of the insured and the benefits actually received. Hybrid long-term care policies exist, incorporating life insurance and/or annuities.
Does your financial plan have downside risk protection?
We cannot predict with total certainty how markets will behave. The distinction between investing in the market versus gambling in the market is a sober appreciation of the fact that our educated guesses on the direction of the market may turn out to be wrong and that long-term success depends on mitigating the fallout from negative market events.
Do you understand the products that you own for protecting against downside risk, such as annuities, stop orders, stock options, and a laddered bond portfolio?
An annuity is a financial arrangement by which a person makes one or more premium payments and in return, will be guaranteed regular income payments in the future, typically the rest of the person’s life; this is a method that mitigates the risk of the person living beyond what his other savings and investments what otherwise be able to provide for.
A stop order is an order to buy or sell a stock once the price is above or below a specified number. Such buy and sell orders are used to limit possible losses on investment, whether the investor has made a short (i.e., believes a stock price will decrease) or long (i.e., believes the price will increase) investment, respectively, on the stock.
A stock option is a purchased right to either buy (termed a “call”) or sell (termed a “put”) a stock at a defined price. The owner of the call or put option can limit his risk on either a short or long investment.
A laddered bond portfolio means investing one’s money in a series of bonds that have staggered maturity dates. This approach gives the investor more access to cash since bonds will mature more often. Additionally, owning bonds of varying maturity dates reduces the risk of having money tied up in a long-term bond when market conditions would dictate alternate investments.
Cyber Threats and Identity Theft
Do you have insurance that specifically covers cyber threats?
It is prudent for business owners to purchase insurance against cyber threats. An attack on a company through its computer systems not only endangers the company’s data and funds, but if a data breach is made known to the public, it could cause a loss of reputation and future business opportunities. The insurance industry as a whole is still working out the details of how to assess this modern-era risk, but policies are currently available from several major insurers.
Do you have proper antivirus and malware protection?
New viruses and computer scams are constantly being devised. It is important to have the proper software on both home and business computers to protect against these risks. In particular, your computer should have automatic and regular malware and virus scans, and all security software updates that your software vendor offers should be promptly performed.
Have you protected your credit cards?
A few practical steps can keep your credit card numbers confidential. Credit card numbers should never be shared with unverified sources, whether over the telephone or by email. It is not uncommon for thieves to pose as legitimate businesses or even charities to solicit credit card information. The “autofill” option available on many internet browsers should not be used to store credit card information. Login passwords should be changed regularly and varied between different websites. Credit card transaction reports should be regularly reviewed for suspicious activity.
Do you have an appropriate backup on your computer?
Whether the data stored on your computer was intentionally damaged by an outside party or was lost because of a technical failure, the loss of important data can be very damaging to the operation of businesses and to one’s personal finances. Data can be stored on either physical devices maintained by the data’s creator, such as a USB stick or external hard drive, or on the so-called cloud (i.e., your data could be stored on hardware maintained by a third party, which is accessed by the internet).