5 Top Insurance Tips For Retirees
Even millionaires are unsure about how much to save for retirement, according to recent research. Theres a big opportunity for planners in this area, and beyond saving and investing, making sure clients have adequate insurance coverage is also part of the process. Heres an interactive slide show with five tips from ACE Private Risk Services on maintaining adequate coverage into the retirement years:
Personal liability awards and settlements arising out of serious injuries in accidents or even libelous or slanderous statements online can reach into the tens of millions of dollars. And yet more than 40% of high-net-worth households have less than $5 million in umbrella liability coverage (that includes 21% of households with none) to supplement the liability coverage in their home and auto policies, according to an ACE survey.
Umbrella liability coverage is important for retirees to consider, however, as they have less time to make up for lost wealth in the event of a significant personal liability settlement, according to ACE.
The good news: the cost of adequate coverage can be only a few hundred dollars per million dollars in coverage, and that expense can often be offset by finding savings elsewhere in a personal insurance plan.
The primary home and any vacation homes often represent a significant part of retirees net worth, yet most homes in the U.S. are not insured for the entire cost of rebuilding if the house burns down or is otherwise destroyed.
A study by building cost data provider Marshall & Swift/Boeckh found that 64% of American homes were underinsured.
To be properly insured, retirees should seek policies that provide full replacement cost coverage, since there are always multiple factors pushing rebuilding costs higher, and any potential gap in coverage could represent a threat to a retirement plan.
Individuals who have accumulated a lifetime of belongings rarely know how much it would cost to replace everything in their home after a total loss, and the prospect of thoroughly cataloging all their possessions is often overwhelming.
As a result, contents coverage is too often based on assumptions. ACE research suggests the status quo leaves many owners of high value homes with significant gaps in contents coverage.
In a pilot program with agents, ACE completed more than 400 estimates during a four-month period and found that nearly half the homes studied had insufficient contents coverage.
For homes with structural values between $2 million and $7 million, the average level of underinsurance approached $600,000.
In retirement, theres more time to devote to passions like collecting wine or fine art. Such collections are increasingly seen as a means of investment diversification, too, according to ACE research on high-net-worth households.
Yet many collectors dont take the necessary steps to minimize the risk of damage, theft and other hazards that threaten the value of their collections.
According to an ACE survey of investors with at least $5 million in investable assets, 94% own collections of significant value, and yet nearly 40% did not have all their collections insured with a valuables policy.
An ACE survey of 600 independent insurance advisors found that many high-net-worth households overpay to be underinsured a wasteful and risky proposition for retirees.
Missed savings opportunities occur in three primary areas:
1) Deductibles are too low, which raises the cost of premiums. Assuming more risk for losses that can be reasonably absorbed, by having plans with higher deductibles, can result in substantial premium savings that over time far outweigh the risk of paying a higher deductible amount after a loss.
2) Package discounts: 55% of agents noted that affluent consumers do not take full advantage of discounts earned by consolidating their insurance policies with one carrier.
3) Loss prevention credits: 36% of agents said that affluent consumers are unlikely to get credit for alarm systems and other loss-prevention measures protecting their homes or vehicles. When combined, credits for such systems can exceed 30% of the base homeowners premium and range from 5% to 20% on comprehensive auto coverage premium.