Insurance World

Just because you have insurance doesn’t mean it will be enough to protect your hard-earned assets should the inevitable happen. There are countless situations - like a home fire, a car wreck with injuries, or someone getting hurt on your property (to name a few) - where your level of home or auto insurance could make or break your financial future.

Here are five commonly made insurance mistakes and how to avoid them, according to Charles Valinotti, General Casualty Insurance Companies’ assistant vice president, and John Blodnick, Unigard Insurance Group’s vice president.

1. Buying the cheapest policy out there. You might save a buck by getting the minimum amount of insurance you legally can. But if the cost of an accident ends up being more than your policy covers, you’re still responsible for paying the rest. Other parties could go after you and your assets.

2. Forgetting to pay your bills. There are plenty of understandable reasons why you might not pay your bill on time. But be warned that if you don’t pay your bill, your insurance company isn’t obligated to cover you - period. To avoid this, set up automatic payments through your bank or insurer or escrow for your home insurance. Otherwise, move your insurance bill to the top of the stack.

3. Assuming your stuff is covered. Policies limit how much coverage they provide for certain higher value items. Have a diamond wedding ring? Antique silverware? Customized wheels on your truck? Nice stereo system? Expensive guitar? These could fall outside the realm of a typical home or auto policy’s coverage. It’s easy to rectify this problem by “scheduling” or adding extra coverage with an endorsement, which gives you higher limits on certain items.

4. Not bothering with an umbrella liability policy. Umbrellas are only for rich people, right? “No, umbrellas are for every Tom, Dick and Harry. Think about your annual combined household income. Isn’t that worth protecting?” Valinotti said.

What if someone got hurt during your child’s next birthday party or your upcoming backyard barbecue? You can purchase an umbrella for as little as $100 for $1 million of extra coverage, depending on the policy and which area of the country you live in. “It’s a risk not to have an umbrella, like playing the lottery with your financial future,” Valinotti said.

5. Keeping your agent in the dark. If you’ve recently built an addition on your home or made a big purchase (see number three), talk to your agent. Without extra coverage, you could be underinsured. Or if you get your bill and decide you want less coverage, talk to your agent. Policy changes may or may not be a good idea, but it’s your insurance agent’s job to advise you.

“Today, people often feel that an agent is not necessary,” Blodnick said. “However, considering the complexity of the products you are buying in an ever-more complex world, the expertise of a professional agent can be extremely important.”

For example, at a glance you may think, “I don’t need ‘other than collision’ coverage on my car.” But your agent would tell you that’s what covers you if your vehicle is stolen, catches fire, is damaged by hail or wind (such as a tornado), or if you hit a deer.

Your agent can also suggest ways to save money on insurance without risking your financial security – such as taking a driver safety class, getting a home security system, taking down the trampoline your kids never use, increasing your deductible, or taking advantage of multi-policy or good student discounts.

Contact your local independent insurance agent for a review of your personal insurance policies. - ARA

1. Health Savings Accounts (HSA)

This is a strategy where the employer buys a health plan with a large deductible. Typically, these are groups that are coming from a plan with a very low deductible. Since the higher deductible plans are usually much less money, the money saved is used to put into the employee’s “Health Savings Account.” The money in this account is used by the employee to pay qualified medical expenses. If it’s not used, the money rolls over to the next year. The money belongs to the employee, even if they leave the company.

2. Health Reimbursement Arrangements (HRA)

This is very similar to the HSA above but a portion of the qualified medical expenses not covered by the insurance is “pledged” by the employer, that is, the employer only spends the money, if there is a portion of the bill not paid by the insurance. This would be more favorable to the employer since on an HSA the money goes to the employee, whether there are claims or not. The problem with HRAs is that there are very few carriers that offer them right now.

3. Medical Reimbursement Accounts

This is very similar to HRAs above and extremely flexible. It’s otherwise known as partial self-funding. Employer buys a larger deductible and if the employee uses up that deductible, the employer pays all or a portion of it, depending on how a pre-arranged agreement is written. This goes for other expenses not paid by the insurance. The idea is that the employer self insures the typically smaller expenses with their own cash, (presumably, the savings in premium dollars from going to a higher deductible.) The downside to this is that many carriers prohibit the use of this strategy with their plans. It can be very effective but make sure you use an experienced third party administrator as there may be some legal and tax documentation required. Otherwise known as Section 105.

4. Kaiser.

More and more groups are moving to Kaiser. It is typically, benefit for benefit, less money than just about every other plan. Kaiser is spending billions on the future and their quality control is promising.

5. Offering Blue Cross and Kaiser side by side. Blue Cross has a new program where only five employees need to enroll with Blue Cross. The rest can be with Kaiser. This is a ground breaking opportunity in flexibility.

6. Blue Cross Elect. Blue Cross has a portfolio called Elect with 16 plans in it comprised of HMOs, PPOs, and an EPO plan. Each of these plans is priced from low premiums up to a much higher premium.

The beauty of this program is that Blue Cross allows the employer to “define” how much premium they are willing to pay towards an employee’s cost. For example, Blue Cross offers a $10, $20, $25, $30, $35, and a $40 copay PPO plan. The $10 plan is the most expensive of this group.

After viewing all of the premiums for the various plans, the employer can establish, arbitrarily, which plan they are willing to pay, say the employee only premium for. In this case, let’s say it’s the $25 copay plan. The employee can buy the $25 copay plan and it doesn’t cost them anything. However, if they want the more expensive $10 copay plan, the employer would payroll deduct the difference in premium costs.

Let’s say they have dependents they want to cover but the employer only wants to pay for the employee only. The employee could take the lesser expensive $40 copay plan, and use a little bit of the savings to help them with the costs of adding their dependents.

This has been a highly successful program because it gives the employees a greater number of choices, helping the employees be more definitive in their costs and needs, and at the same time, allows the employer to more efficiently define their costs.

This information is time sensitive and can change at anytime. If you have a question or need more information, please contact me at mail@thestrategyguide.com. –Todd Rich

Todd Rich is an expert on California Small Group Health Insurance Plans and has written four books on the subject. To learn more about Todd and his books, please visit www.TheStrategyGuide.com/ezines