Volume 1 of The Most Important Information That You Will Ever Receive

     Often times when I am visiting with an individual for the first time or reviewing an existing client’s insurance portfolio, I am asked, “What would you do?” It’s quite possible that the next four newsletters could be the most important that you receive from me because they will change your life for the better. I will be discussing exactly how I structure my insurance policies to:1) Protect my future earning power; 2) accumulate wealth; 3) and achieve financial independence.  When structured correctly, your insurance portfolio should not only protect your current assets, but also create an environment that allows your wealth to grow. That statement sounds bold.  Sometimes facts are bold. I’ve watched it happen to every client who follows this model.

     In this first installment we are going to discuss the structure of your auto insurance policy.  If you are a contractor and only have a commercial auto policy don’t feel left out because the principles apply to your policy as well. First, ignore all of the insurance commercials that you see on TV.  Most insurance companies and agents miss the mark completely on auto insurance.  I recently heard a Farmer’s Insurance advertisement that said that their agents are trained to slash your auto premium. Great, are they trained to manage my liability limits when my truck hits a patch of ice and slides into the other lane? Another company promises 15% savings in 15 minutes or less.  Last month I had a client come to me with a GEICO policy that was missing uninsured motorist coverage.  That’ll save 15% for sure, but any way you cut it these insurance companies are selling auto insurance at a cost to their policy holders. Their focus is on the price alone.  We will make up that price many times over when this is all complete. 

     The most important coverage that your auto policy provides is the liability.  When you hit that patch of ice and slide into the other lane and injure a family, what is protecting your life savings and future earnings from being taken away? The answer is your auto liability insurance.  Keep those limits high.  I recommend a limit of $500,000. Contractors, if your commercial auto policy is at $1,000,000, keep it there. On a personal auto  policy the difference in premium between $500,000 and $100,000 is very small.  An equally important coverage is your uninsured and underinsured motorists coverage.  Your uninsured and underinsured motorists coverage should be equal to your liability limits.  Again, I recommend $500,000. Uninsured and underinsured motorists coverage is for you and your family.  If you are injured by an at-fault driver and lose your ability to earn a living, your can collect on your own insurance policy, up to your limits to help pay for your loss of earnings and pain and suffering if the at-fault driver does not have enough insurance, or no insurance to pay for your losses.  We will discuss the importance of a liability umbrella in another installment.

     When most people think of auto insurance, they think of physical damage coverage for their vehicle in the event it is damaged in an accident.  “Full Coverage” “as the public refers to it” can be important, especially if you have a newer vehicle with a loan.  If you carry a $250 deductible, raise it to $500, $750 or $1,000.  Raising the deductibles will lower your premium, however be careful that you do not select a deductible limit that is higher than you have reserves to pay.

      If your vehicle is older than 10 years and its not a “classic” vehicle, you may want to consider dropping physical damage coverage altogether. There are several other coverages that may come with your auto policy, such as towing, rental reimbursement, glass coverage, etc.  These coverages are nice to have (I have them on my own auto policy) but they are not essential.  

Summary: Your liability limits should be high; your uninsured and underinsured motorists coverage should match your liability limits; and your deductibles (if you carry “full coverage) should be as high as you have the reserves to pay. 

      Have we protected our earning power, accumulated wealth and gained financial independence? Not quite, but we’re well on our way.  We’ve helped protect our earning power with high auto liability limits.  We have a nice solid wall between our assets/future earnings and possible negative consequences.  Read next month’s newsletter to see how we take one more step forward towards our goal of financial independence.  We will achieve it. If you can’t wait that long, call me.

November Checklist

November Checklist

Time Change: Sunday, November 7th at 2 a.m.  Set your clocks back one hour.

Medicare open-enrollment time: November 15 to December 31.  Review Medicare Advantage plans carefully.  For assistance, contact our office.

Business Perpetuation

Protecting your business with a buy/sell agreement

Mike Smith is the sole owner of Smith Quality Construction.  Mike’s family depends on the business for their stream of income. To protect his business and family, Mike took out a life insurance policy on himself and named his key employee as the beneficiary.  If Mike dies unexpectedly before retirement, the benefit of the life insurance will be paid to the Smith Quality Construction’s key employee, who will then under contract of a buy/sell agreement, purchase the business from Mike’s wife.  Doing so insures that Mike’s family will get the fair value of his business and  Smith Quality Construction will continue with the key employee as the new owner.  Buy/sell agreements are not only important for an unexpected death of a business owner, they are also vital for transition when a business owner retires.  Did you know that in addition to providing a death benefit, the cash value in a life insurance policy can also be used to help buy a business from a partner or sole owner. Running a successful business requires careful planning.  Taking care of your business’s perpetuation plan today will save your family unduly distress later on.

Preventing Frozen Car Doors

It’s a rookie mistake to wash your car in the evening and leave it sit out all night in the winter.  Chances are you’ll be greeted by frozen car doors in the morning.  Frozen doors in the winter can be a problem.  One way to prevent this is by applying a silicon spray to the car door’s rubber door gaskets.  This reduces the odds that the gaskets will freeze to the frame and prevent entry or exit.  It is also a good idea to spray aerosol lubricant into the car door’s locks.  Doing so will make it less likely that the locks will freeze shut too.

Keeping Your Money is a Good Thing

“Stimulus Checks Sent to Dead, Incarcerated.” That was a title of an article printed in the Wall Street Journal on October 7^th. Our government sent 55,000 checks to people who were no longer living and 17,000 checks to people who are in prison.  I’m going to go out on a limb and say that you and I do a better job of managing our money than the Federal Government does at managing our money. Wouldn’t it be nice if there was an investment vehicle that would allow us to save money; gain tax free interest so that Uncle Sam keeps his hands out of our gains; and allows us to access our money at anytime without penalty? There is!

First, what are the wealthy doing with their money? Where are they investing it?  What if I told you they are investing it in life insurance? Mark Maremon and Leslie Scism reported in an October 3^rd Wall Street Journal Article that the top 10% of income earners in America own 51% of the tax free investment gains in life insurance.

You’ve been told that life insurance is a bad investment tool.  Financial advisor Pamela Yellen, author of “Bank on Yourself” is offering $100,000 to anyone who can find a better investment plan. The policy that I use for myself and clients is known as a participating whole life policy that is written with a non-direct recognition life insurance company.  Its life insurance on steroids and in my opinion it should be the backbone for anyone’s financial portfolio that yearns for financial independence. Why is it important to invest with a non-direct recognition insurance company? Would you like to be able to recapture all the money that you put towards major purchaces such as car payments, home improvements or vacations? A policy written with a non-direct recognition company allows you to do just that.  Contact me to learn more.

Shift to Wealthier Clientele

http://online.wsj.com/article/SB10001424052748703435104575421411449555240.html?KEYWORDS=shift+to+wealthier

Stimulus Checks Sent to Dead

http://online.wsj.com/article/SB10001424052748704696304575538483156036168.html?KEYWORDS=Stimulus+checks+sent+to+dead

When I was in elementary school my dad would throw my dirt-bike in the back of his pickup truck and he’d drive me to the high school after all the teachers had gone home so that I could ride in the parking lot. I look upon those days with fond memories, well, all except one.

I remember rounding the building after a particularly blazing display of speed to see my father talking to a police officer who had just pulled up in his police car.  Our intentions where harmless, but the sight of my dad explaining our actions to the officer frightened me. I kept my distance.  “Better my dad go to prison than me,” I thought.  "He’s old (probably 39) and I have the rest of my life to live." To my surprise the officer got in his car and drove away.  He had told my dad to tell me to be careful.  Times have changed, and if you are an ATV owner, so has the law.

Ohio Law Changes Insurance For ATVs

The State of Ohio now requires all-terrain vehicles (ATVs) to be registered with the Bureau of Motor Vehicles. Vehicles that are subject to registration are excluded under homeowners insurance policies. This means that if your ATV is stolen, your homeowner’s insurance policy will not pay for the loss. The exception to this rule is that if you own a farm and have your home or country estate insured on a farm-owner’s insurance policy.  If you are not a farmer, and own an ATV, you can obtain insurance coverage for your ATV by purchasing an ATV insurance policy. 

Drive Other Cars and My Partially Stolen Cavalier

One day last summer I was having one of those days where I had more jobs that needed completed than minutes in the day.  Doing my best to multi-task, I was answering a client's question on my blackberry while walking out of the bank.  I grabbed the door handle of the car, lifted it and sat down in the seat without taking my eyes off the email that I was typing.  When the funny odor hit my nose I realized it was time to clean my car; except, I didn't drive a car, or even own a car.  At the time I had an SUV, which meant the Chevy Cavalier that I was sitting in wasn't even mine. 

I didn't drive the Chevy Cavalier that day.  In fact, I slipped out of it as slyly as possible, hoping that no one had witnessed me enter a vehicle that wasn't mine. I would say a majority of the time when we drive vehicles that are not ours, we have permission to drive them.  The other side of the coin is called auto theft and is highly frowned upon by society. When we do drive other people's vehicles with their permission, our personal auto insurance extends to cover our personal auto liability while we are driving that car.  In Ohio, typically the owner's insurance is primary and the driver's insurance is secondary, but what happens if you get behind the wheel of a car that isn't insured? Thankfully you don't have to worry about that if you have a personal auto policy for yourself.  What if you don't have a personal auto policy? What if you insure all of your vehicles on a commercial auto policy? If a commercial auto policy is all that you have, read the following and call your agent to make sure that you have "Drive Other Cars" coverage on your policy.

 Drive Other Car Coverage

Bob Plum is a self employed carpenter who insures his pickup truck on a commercial auto policy.  Bob does not have a personal auto policy because his pickup truck is the only vehicle that he owns.  Bob has done the right thing by insuring his truck on a commercial auto policy because he uses his truck for business purposes and routinely uses it to haul his equipment trailer from job to job.  Since Bob does not have a personal auto policy, we added “Drive Other Car Coverage” or D.O.C  to his commercial auto policy, which gives Bob liability coverage when he drives a vehicle that he does not own.  A personal auto policy automatically comes with this coverage.  For those of you who have both a commercial and personal auto policy, it is not necessary to add “Drive Other Car Coverage” to your commercial auto policy, but it should always be present if a commercial auto policy is the only auto policy that you use to insure your vehicles.

An Umbrella for a Rainy Day

Four weeks into the season and the Cleveland Browns picked up their first win on Sunday.  I have to admit, for about an hour after the victory I was thinking Super Bowl. I think mental endurance is part of being a Brown's fan. We endure miserable heart-breaking losses for weeks, seasons and decades in a row  and the first taste of victory fully recharges us to endure it all over again.  Next game, next year is ours!  Not every day will be a good one. My job is to prepare you for the worst.  By doing so, we'll insure that your future remains optimistic.

Steven Anyone was having one of those days that he’d like to forget.  He woke up late and because of traffic he ended up being late to work as well. His cell phone rang and it was his wife on the other end informing him that their water heater had just gone out.  He hung up, set his cell phone in the cup holder of his car and looked up in time to see that he was driving through a red light. He had little time to brace for impact before his car slammed into the side of a minivan carrying a family of four.

Fast forward, six months: the property damage, bodily injury, pain and suffering and loss of income to the injured party that Steven caused was severe.  Much to the disappointment of the victims, the court awarded the injured family only $750,000 in compensation.  Steven’s auto policy provided bodily injury  liability limits of $500,000.  If this were all the protection he had, Steven would be on the hook for $250,000.  All of Steven’s savings, possessions and retirement income are at risk; all of his life’s hard work. If Steven doesn’t have this much money available, the court could garnish his future wages until his debt to the victims is paid. 

Luckily, when Steven and his wife purchased their auto and homeowner’s policy, they also purchased a supplemental liability umbrella that provides an additional $1,000,000 of liability coverage on top of their home and auto insurance.  The $250,000 excess that Steven’s auto policy could not pick up was absorbed by his liability umbrella, and because of that, Steven and his wife do not have to put their life on hold, and the family that Steven injured will be compensated for their injuries and loss.

Concert Pianist Awarded $618,000 From Crash

This is a headline from an article that I have laying on my desk.  The at-fault party was a State Farm insured.  The article did not say if the insured had enough liability insurance to pay for the judgment. Some may ask, “What is the chance of that happening to me or my family?” The fact that the chance exists is enough for me. I don’t have a second lifetime to re-accumulate my savings and retirement.  How much does an umbrella policy cost? What if it was possible to obtain $1,000,000 in additional liability coverage for   little to no out of pocket outlay? Would you take that opportunity? Depending on how your home and auto policies are structured, it may be possible to obtain an additional $1,000,000 of liability coverage for little or no cost.  Contact me directly to learn more, and see if that is possible for you.