Insurance Awareness With Ann Jevne, Financial Planner With Schwartz & Hofflich
Friday, March 25, 2005PAUL KANGAS: As we noted, insurance offers one of the most important ways to protect yourself from a disaster`s financial blow. When you have insurance coverage, a company is sharing your financial risks and that can make a big difference if you suffer a catastrophic loss. But as correspondent Jeff Yastine reports, it took a hurricane to make residents of one Florida town aware of the shortfalls of their insurance policies.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Punta Gorda, Florida. This was ground zero in August 2004, when hurricane Charley roared through the area. It was the first of four hurricanes to hit the state that year, causing billions of dollars in damage. The debris has been cleaned up, but even now months later, the damage is plain to see in many buildings and homes. And other houses, seemingly intact, have blue tarps on top, indicating serious roof damage. The region has always been at high risk for hurricanes, but many homeowners found out too late that their policies did not fully protect them. Buying coverage for hurricane winds, or windstorm insurance is expensive, and the policies come with high deductibles, so many homeowners wound up paying for thousands of dollars in repairs out of their own pockets. Insurance agent Wilson Wheeler says the storms have proven to be a wake-up call for his clients, with many questioning whether they`re adequately insured.
WILSON WHEELER, INSURANCE AGENT: Are we insuring to the right amount? Is this proper coverage? Am I OK with the coverages that I`m buying? What are my deductibles?
YASTINE: Insurers say one of the biggest problems they see is people being underinsured, oddly because homeowners perceive certain kind of coverage as being too expensive or because the replacement value of the home keeps moving higher, but the homeowner does not adjust the coverage to reflect that additional value.
GORDON STEWART, PRESIDENT, INSURANCE INFO. INSTITUTE: People say, "oh my gosh, this may cost me more." It doesn`t occur to them that the house is now worth maybe 25 percent more and that for another $50 to $100, they could take care of that value. So it`s really, they`re trying to save a little bit of money for no particular purpose, because the purpose of insurance is to have your risks covered.
WHEELER: But it`s amazing, the people that remodel, upgrade, rip out bathrooms, change kitchens, add rooms, add pools, add carports, add screen enclosures, and we never know about it. And so all of a sudden in addition to the 5 or 6 percent inflation guard, they`ve added a $25,000 or $30,000 improvement to their home, and that`s not accounted for.
YASTINE: To prevent this, insurers say you should talk to your agent and make sure you`re coverage is keeping up with inflation and whatever changes you`ve made to your home. Also, make sure you`re buying coverage from an insurer with high ratings for financial soundness. In the wake of hurricane Andrew in 1992, a number of insurers went bankrupt, making policies worthless. And check what kind of events your policy does not cover. In many regions, floods, earthquakes, even landslides may be excluded from your standard policy and require your buying separate coverage. And sit down and actually read your policy and note the details. Especially important is how much comes out of your pocket in the way of a deductible, before your insurance kicks in.
DOUGLAS LAFAIVE, PRES., LAFAIVE & ASSOCIATES/CLAIMSHELP.COM: The majority of the people that I run into haven`t even read their policy. They may get a, what`s called a declaration page from their insurance agents or insurance company. They look at it. They see their name, the amount of coverage on the policy; and I don`t think they -- or my experience is they don`t read the policy itself to see what they`re covered for and what they`re not covered for.
YASTINE: So whether your home is at high risk or low risk of being involved in a disaster, the key is to make sure that your homeowner`s insurance is ready to handle a worst-case scenario. Jeff Yastine, NIGHTLY BUSINESS REPORT, Punta Gorda, Florida.
SUSIE GHARIB: So should you go out and buy special insurance for an event that might be only a remote possibility? Here to answer that question, Ann Jevne. She`s a certified public accountant and certified financial planner at Schwartz and Hofflich in Norwalk, Connecticut. Hi, Ann.
ANN JEVNE, CERTIFIED FINANCIAL PLANNER, SCHWARTZ & HOFFLICH: Hi, Susie.
GHARIB: Well, obviously you can`t go out and protect yourself against every possible disaster. What do you tell your clients when they ask you what kind of coverage they should get, and what would be appropriate for them?
JEVNE: OK, what I try to do is tell them to definitely have replacement value insurance, to look at their policies, look at the company that they have, to make sure that they`re appropriately covered, to... if they`re in an area like Florida, to make sure that they look into to trying to get hurricane insurance, wind insurance. If they`re in a sinkhole area, to try and get sinkhole insurance, consider mold insurance, also, if they`re in California, to get earthquake insurance. And those are things that I ask them to look at. Also to make sure that they have an umbrella liability policy and that`s coordinated with the rest of their insurance.
GHARIB: Well, since you brought up the issue of Florida, as we`ve heard in getting hurricane-related insurance in Florida, not only is it very expensive, but it`s hard to get, and it carries a very high deductible. So what advice do you give people who live in these high- risk situations?
JEVNE: I tell them to make sure that their home is built to code. Or if it`s not built to code, that they do improvements to bring it up. They might have to go into the pool, in which case that`s better than nothing, to be able to get into the pool. They should look seriously at the companies that have... some companies will cover individuals if they`ve been a past customer. And then they should look at the quality of the company that they want to try and have their insurance with.
GHARIB: Once you`ve decided the kind of insurance coverage that you need, the next big question is how much is enough and how much is too much? How do you determine that?
JEVNE: Well, I ask clients to look and see how much do they want to lose? Insurance is transferring and sharing risk with an insurance company. So I want to make sure that clients have sufficient amount of cash flow - liquidity -- and I want to see what it is that they think that they can afford to lose.
GHARIB: Now, I understand that it`s very important to be sure that your general homeowner`s policy protects you not only for your home, but also for the contents. What are the things that people should absolutely make sure that they have in their coverage?
JEVNE: They should have a broad coverage, make sure that their not being too limited on the amount of coverage that they have, make sure any valuables that they have; jewelry, silver, antiques are all specially recorded, that they have a current appraisal. Make sure that they talk to their insurance company and they get their home appraised so that they can get the 100 percent of value.
GHARIB: Very helpful information. Thank you very much, Ann.
JEVNE: Thank you.
GHARIB: We`ve been speaking with Ann Jevne, certified public accountant, personal financial specialist and certified financial planner.
KANGAS: After a disaster strikes, the focus shifts to restoring life to normal as quickly as possible. But that isn`t always so easy. And the period immediately following a disaster can be especially difficult. Midwest bureau chief Diane Eastabrook reports on steps that can help ease recovery and reconstruction.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: For disaster victims, the calm after the storm can be the most physically and emotionally taxing phase. It begins with clean-up and damage assessment.
RON CARPENTER, HOMEOWNER: It damaged siding. It damaged the awnings. It broke windows in the front, broke windows in the kitchen.
EASTABROOK: Ron Carpenter knows how difficult picking up the pieces after a disaster can be. Last April, a violent tornado ripped a destructive path through tiny Utica, Illinois, killing eight people and causing millions of dollars of property damage. Carpenter says his first thoughts were of being grateful that he survived the storm. His next thoughts were of cleaning up the mess it caused. Did you try to do anything to clean up or repair afterwards?
CARPENTER: Oh yeah, clean up the glass of course. I didn`t want somebody stepping on glass, and I got the glass cleaned up on the porch.
EASTABROOK: Today, there are still reminders of the deadly storm around town. The twister did $20,000 of damage to Carpenter`s home, but he has only pictures to prove it. Within a few months of the tornado, his house was nearly as good as new.
CARPENTER: Just make sure you have a good working relationship with your insurance agent. That`s going to help a lot right there.
EASTABROOK: Experts say the right steps taken after a disaster can be crucial. The first order of business is to make sure you and other family members are safe. Second, gather essential information such as insurance policies, bank statements and other financial documents. And don`t forget to take any cash on hand or credit cards. Third, contact your insurance agent, so he or she can start assessing damage and help you file a claim. That should be done within 24 hours of the event. To prevent further property damage, State Farm agent John Pini also advises clients to make minor repairs immediately.
JOHN PINI, AGENT, STATE FARM INSURANCE COMPANIES: If there was a hole in the roof, we asked them to try to find a carpenter, a local carpenter to tarp it and so forth.
EASTABROOK: Once an insurance claim is filed and repairs can begin, the next task is finding a contractor to do the work. While some agents do provide lists of area contractors, they can`t dictate who you can use. For your own protection, experts say it`s a good idea to use a contractor who is bonded. Also, get a written agreement that spells out when the work should be finished and what materials will be used. Pay with a check or credit card; don`t use cash. If your insurance policy has a large deductible, many contractors will require you to provide proof that you can cover the deductible.
JOHN EAGER, PROPERTY CASUALTY INSURERS ASSN. OF AMERICA: Proof of payment could be a credit line. It could be a balance in your checking account. It could be a letter from your bank saying that you have the funds to cover that sizable deductible in the first portion of your damage.
EASTABROOK: For businesses, the first steps following a disaster are similar to those taken by homeowners, but businesses often need to find temporary space and additional funding to keep their operations running throughout the repair process. If traditional insurance doesn`t cover everything, the Small Business Administration can help with loans that provide up to a $1.5 million for property damage. The SBA can also provide an additional $1.5 million in loans for economic injury.
JUDITH ROUSSEL, DIR., SMALL BUSINESS ADMINISTRATION: A business must be able to present financial information that will substantiate the loss and that would be things such as a listing of the kinds of expenses and the amounts that they would normally incur.
EASTABROOK: Many people go through one disaster only to encounter another in the reconstruction process. But being careful in choosing and doing business with contractors is one of the most important lessons for anyone who`s trying to rebuild. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Utica, Illinois.
