Mother Nature is in Charge!

Americans are getting a little disaster weary.  From the horrific wildfires out west to torrential rains and flooding all summer in the east, it has been quite a year.  And in the south and east, we all know what August means…hurricane season is upon us!  Mother Nature is getting on our nerves in 2018!

How can we protect ourselves to minimize the risks to our homes, our property and our livelihoods?  Mitigating risks from catastrophic events starts with prevention and planning by both government and individuals.  Prevention can start with using damage-resistant building materials, having elevated home designs, enforcing safe building codes, developing flood plain management systems, securing or removing hazards ahead of storms and by having evacuation or escape plans in place.  FEMA has an 81 page guide of Mitigation Ideas to deal with earthquakes, landslides, floods, hurricanes, hail, lightning, tornadoes, severe winter weather and more.  https://www.fema.gov/media-library-data/20130726-1904-25045-2423/fema_mitigation_ideas_final_01252013.pdf  There are many threats coming from our environment, but many things that can be done to lessen some of the painful aftermath of these occurrences.

We certainly can use property & casualty insurance to plan and prepare for the worst.  In hurricane-prone areas, for example, we have riders for “named storm” or “wind and hail” coverage that comes with our homeowner’s insurance.  The costs of the insurance can be reduced by increasing the amount of a deductible you want to have or, in other words, how much you can afford to pay out of pocket for repairs after a storm.  We also look for extra coverage for those circumstances when there is a widespread event like a hurricane that may drive costs up with higher demand for labor and materials.  Homeowners may want to have an extended coverage rider built in to help with those higher costs.  It is important to evaluate what your risk tolerance is for these situations and how much you want to pay to transfer some of the risk to the insurance company.  If your home is destroyed or badly damaged, do you have a comfortable level of protection for you and your family?

There has been much discussion on the 50 year old National Flood Insurance Program, as well. President Trump recently signed the legislation to extend the debt-ridden program until November 30th.  That means not dealing with necessary reforms until after hurricane season and mid-term elections.  The federal program, which is some $20 billion in debt to the U.S. Treasury, offers subsidized flood insurance to coastal or flood-prone areas where private insurers have pulled out or made it unaffordable.   As it is, the NFIP provides coverage with caps on claims for homes at $250,000 and on property at $100,000.  Many higher-value property owners may choose to also carry “excess” flood insurance to bridge the gap between the federal program caps and the value of their homes and property.

Unfortunately, the reduced premiums from about 5 million NFIP flood insurance policies nationwide cannot adequately support the claims that have come from recent events, including storms like Sandy, Katrina, Harvey, Maria, Irma and Matthew.  And hurricanes aren’t the only cause of flooding.  We have seen some of these epic rainstorms cause significant inland flooding and damage.   As the head of the SC Department of Insurance said recently, “our entire state is in a flood-zone.”  And this may be true for many areas in the South, East and Midwest.  It is clear there is a need for a flood program that can provide support for affected residents after a storm, especially as we see changing climate conditions and rising sea levels. Lawmakers thus far have been unable to find a bi-partisan fix to the financially strained system.

As homeowners and members of our communities, we should certainly do our share to prepare for these natural events and make sure we have a solid plan in place for our families and our property.  We can maintain our property, keep our own emergency fund and can participate in the insurance coverages available to help protect us.  And we should hope and expect that our legislators – local, state and national- will compromise to find solutions to reform existing programs and to prepare disaster plans that can assist all of us in the event of a catastrophic event.

At DWM, we use a holistic approach to evaluating your financial plan, including risk management.  We will help you review all of your property & casualty insurance policies to ensure that you have appropriate coverage for you and your family.  Let’s hope Mother Nature stays peaceful for the rest of the year!

HURRICANE SEASON 2017: SPOTLIGHT ON FLOOD INSURANCE

Water seems to be everywhere right now.  Hurricane season lasts until November 30th, but many of us in the coastal areas of the United States are already weary from this year’s active storm season.  Texas, Florida, Georgia and the Carolinas have seen widespread damage from Hurricanes Harvey and Irma and those in the East and Northeast are closely watching Jose and Maria to see what kinds of impacts they will bring.  As we watch the news and see the photos of flooded homes, streets turned into waterways and communities working to recover from the mess, the reported costs of these two storms seems almost unfathomable – estimates of the total economic cost for both storms range from $115 billion to $290 billion!  Many of those in need of assistance appeal to FEMA, the Federal Emergency Management Agency, and, while FEMA can provide small assistance payments as a safety net, much of the flood damage assistance must come through FEMA’s National Flood Insurance Program (NFIP) – and you must have a flood insurance policy to receive anything from them.

Premium rates for flood insurance policies are partially subsidized by the federal government and, without these subsidies, the cost for this type of insurance could be exorbitant.  Complicating the matter is that most banks won’t loan money to build or purchase homes in flood-prone areas without it.  Currently, flood insurance claims, partially paid-for by those premiums, will cover replacement costs for property of up to $250,000 and up to $100,000 for contents.  The average NFIP claim payment is around $97,000.  According to a September 10th Post & Courier article, in SC it is estimated that 70% of properties in the high-risk areas are insured.  Also, high-risk areas have a 1 in 4 chance of flooding during a 30-year mortgage, according towww.southcarolinafloodinsurance.org.   However, 30% of flood losses occur in flood zones that are not at high risk.  As the head of the SC Department of Insurance said, “our entire state is in a flood zone.”

The NFIP is now reportedly close to $25 Billion in debt, even before these most recent storms, and the program was set to expire on September 30th.  Last Friday, PresidentTrump signed legislation reauthorizing the National Flood Insurance Program until Dec. 8, 2017 and providing federal disaster assistance for the nation’s hurricane recovery.  This buys more time for Congress to consider reforms to the program, which, by all accounts, is drastically needed.  Reportedly, program costs overrun annual premium income, even without the catastrophic losses from natural disasters.  While a lot of communities have flood mitigation programs in place, there is much discussion that it is time for stronger flood-proofing standards – like making sure that all flood-prone properties are reinforced or elevated and redrawing outdated flood maps to properly assign risk to those properties.  Critics have claimed that the NFIP has wasted money rebuilding vulnerable homes when it would be cheaper to help homeowners move to higher ground.  There is also concern that “grandfathering” certain properties allows homeowners to pay subsidized rates based on outdated flood maps.

The National Flood Insurance Program was created in 1968 when private sector insurance carriers stopped offering the non-profitable coverage.  The idea was to transfer some of the financial risk of property owners to the federal government and, in return, high risk areas would adopt flood mitigation strategies to reduce some of that risk.  Some are now arguing that these subsidies mask the true risk of living in these high flood-prone areas and full actuarial rates for flood insurance premiums should be phased in, subsidizing only those truly in need.  In a Bloomberg article from September 18th, U.S. Rep. Sean Duffy (R-WI) and U.S. Rep. Earl Blumenauer (D-OR) are appealing for reform and suggest that “…the NFIP’s subsidized rates make flood-prone properties more affordable… and that for “ the sake of people’s health and safety”, it’s critical that we “stop paying to repeatedly rebuild flood-prone properties.”  They hope to encourage Congress to reform NFIP and to make bi-partisan recommendations to protect future flood victims.

At DWM, we recommend that you annually review all of your insurance, including property & casualty and flood insurance.  There are many ways coastal or flood-prone homeowners can mitigate their own risk with upgrades to roofs, windows, landscaping, hurricane shutters etc.  You should find out your home’s elevation and evaluate your risk.  You may also want to check on your flood zone and consider a flood insurance policy for added protection.  Flood insurance has a 30-day waiting period, so once there is a hurricane en route, it is too late to sign up and be covered in time.  For most policies not in high-risk flood areas, annual premiums range from $400-$700 under the current regulations – high-risk flood zones will be more.  We will continue to monitor the legislation as it approaches the next deadline of December 8th.  Luckily, our DWM office did not have to contend with any direct flooding issues, but we will most certainly be keeping an eye on the weather!

Please let us know if we can help review any of your insurance policies to make sure you have affordable and appropriate coverage on all aspects of your life and property.

Save the Fan: Reviewing Property and Casualty Insurance

ceiling_fan_cleaningThere is a salty saying by an author perhaps intentionally unknown which is, “A little risk management saves a lot of fan cleaning.”  Our lives today demand that we all have varying amounts and styles of insurance.  We all know we need it, we just don’t necessarily know how much or what kind.  And if a catastrophe or accident occurs, the last thing we want to discover is that we are not covered as well as we thought, or worse, that we aren’t covered at all.  Properly insuring yourself, your family and your personal assets from a variety of risks is a necessary consideration nowadays and it can be confusing to decipher the particulars.  At DWM, we believe regularly evaluating your risk management is a fundamental element in your total financial picture.  As our clients know, we include a regular review as part of our on-going total wealth management process.

It is always important to do a routine annual assessment. Certain life events may trigger a need for policy updates.  My daughter recently got her driver’s license, now my third household driver under 20, so I am particularly aware of how a new driver or change of automobile status can trigger a painful review of auto insurance costs!  With homeowner’s insurance, everyone understands that when you move you will need to investigate property insurance.  It is also a good idea to watch for the renewal notices and review each policy before it is due to renew.  It can be easy to forget about property insurance when it is buried in an escrow payment, so you can check with your mortgage lender or insurance agent to keep track of the renewal date.  There are other events that should make you think about your insurance as well.   Perhaps you added some significant jewelry or art that may need to be covered.  Maybe you did some renovations or improvements to your home recently, like an added security feature, a new roof or upgraded windows.  Other triggers might be changes in lifestyle – marriage, birth, divorce or death can all affect your insurance requirements.  Even sending kids off to college or landing a new job with added responsibility can increase your need for coverage.  All of these changes can impact your property and casualty insurance policies and should be evaluated by an insurance professional.

Besides changes in your lifestyle, it is worth reviewing your policy to look for coverage problems.  Some coastal homeowners’ policies may have very high deductibles for wind & hail insurance.  This includes hurricane damage, but also can include a thunderstorm knocking a tree onto your house.  You might prefer to have a high deductible on the “named storm” coverage and keep the regular wind events covered in the lower amount of your “all other perils” deductible.  Most homeowner insurance coverage uses a standard cost for satisfying replacement or repair claims.  You may want to look for policies with extended replacement cost coverage for custom home features or for inflated costs of goods and services during a large impact event.  Lastly, it is a good idea to be sure you aren’t over-insured.

We also think it is important to watch for changes in the marketplace and keep up with new products or services that might be available to our clients.  We have recently learned more about a company called PURE (Privilege Underwriters Reciprocal Exchange), a mutual company owned by its ‘members’ or policyholders rather than public shareholders.  Their niche model specializes in offering exceptional coverage and savings to “responsible” owners of the “finest built homes” and allows PURE to offer competitive rates for property & casualty insurance, often with premiums at 20% less than their competition.  The idea is to provide competitive coverage to successful families who are motivated to take care of their properties and who value the premium customer service offered to the PURE members.  The PURE founders came from the high net-worth programs at AIG and Chubb and have been inspired, in part, by the successful member exchange concept at USAA.  PURE believes in a client-centric service model with financial transparency and customized and detailed risk management assessment.  PURE writes insurance around the country for high-value properties worth $1 Million or more.  We don’t endorse particular companies, but we think PURE does a good job of acting as a fiduciary for the insurance coverage of their clients.  If you fit their profile, it is worth getting a quote from an agent.

Sorting through all of the coverage levels, intricate policy choices and evaluating your personal insurance requirements can be daunting and time-consuming.  At DWM, we are happy to sort through the details on all of your insurance, including property & casualty, health, life, disability or long term care.  We work with trusted insurance professionals to ensure you have the most appropriate coverage at the best possible price.   We think it is important for all of us to work together to make sure your risk is well-managed.  We hate to see our clients have any fans to clean!

Long-Term Care: What’s Your Plan?

LTC- Ostrich head in the sandLong-Term Care (“LTC”) is a big deal. 70% of those over 65 will need LTC before the end of their lives. One in eight Americans over 65 has Alzheimer’s. 40% of those currently needing LTC are between the ages of 16-64. The 2012 national average annual cost of LTC was $81,000. Costs are escalating 4-5% per year. People are living longer and the cost of care continues to rise.

As a review, LTC means the help needed when someone suffers from dementia or needs assistance with at least two “activities of daily living,” such as bathing or dressing. The care can be provided at home, an assisted living facility, a skilled nursing facility, or a continuing care retirement community.

It’s no surprise that we at DWM consider planning and financing for LTC a key element of financial planning. When we are reviewing MoneyGuidePro simulations of the future with our clients, we usually stress test the plan for LTC. Can the plan sustain the burden of 2-5 years of LTC costs per individual? There are public programs such as Medicaid that pay for LTC, however, our typical client would not qualify for Medicaid. Hence, it is typically a question of “Do we self-insure or do we get a LTC policy?”

Traditional LTC policies are priced based on age, health, years of coverage, the inflation factor selected, and other details. Joint plans are available that provide a couple with a pool of money, that can be used by either of them. Premiums are increasing due to three main factors: claims have been higher than expected, policyholders are not allowing policies to “lapse,” and insurance companies aren’t earning as much these days on the investments of the premiums they collect.

In addition, women are starting to be charged higher premiums than men. It’s not surprising: 2/3 of every LTC benefit dollar is paid to women. They generally live longer than men and have no caregivers at home. Genworth Financial, the country’s largest LTC insurer, plans to start charging women as much as 40% more than men. In addition, in an attempt to minimize future claims, underwriting at insurance companies is getting much tougher.

If you decide to insure, it’s important to work with knowledgeable LTC professionals and make sure your insurer is strong financially so they will likely still be in business if you need to submit claims. You also want your LTC insurance agency as committed to being your advocate when you file benefits claims as they are to have you sign on as a new policyholder.

Lastly, many seniors these days would prefer to stay safely, comfortably, and independently in their chosen residence as long as possible. LTC policies generally provide coverage for both assisted living facilities and benefits for care at home and services for aging in place.

Planning for LTC is very important for everyone, but more so if you are 50 or over. The decision to self-insure or get a LTC policy is often difficult. DWM, of course, doesn’t sell insurance, but we work with excellent LTC professionals in both Chicago and Charleston/Mt. Pleasant who can provide information and answers so that you can make informed decisions for your and your family’s future. If your LTC plan is not in place yet, give us a call. We can help.