60 – Are You Protected

Christian Financial Perspectives

English - November 12, 2019 06:15 - 43 minutes - 60.1 MB - ★★★★★ - 11 ratings
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Previous Episode: 59 – What’s Your Money Style

Next Episode: 61 – Texas Values In Jeopardy

Bob and Mary Jo discuss basic household insurance, commonly referred to as Property & Casualty (or P&C for short). Insurance is one of those things we know we need, but we always seem to buy it reluctantly. Some may view it as a necessary evil, while others may view it as a commodity and opt to shop on price alone. However, some insurance is more than just insurance, it’s real protection. It’s peace of mind knowing that you, your loved ones, and your worldly goods are covered.

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You’ve probably heard previous Christian Financial Perspectives’ podcasts on life insurance, disability insurance, and even Long Term Care. These are just some of the tools we can all use to lower risk. In this particular podcast, Bob and Mary Jo discuss basic household insurance, commonly referred to as Property & Casualty (or P&C for short).

Insurance is one of those things we know we need, but we always seem to buy it reluctantly. Some may view it as a necessary evil, while others may view it as a commodity and opt to shop on price alone. However, some insurance is more than just insurance, it’s real protection. It’s peace of mind knowing that you, your loved ones, and your worldly goods are covered.

HOSTED BY: Bob Barber, CWS®, CKA® and Mary Jo Lyons, CFP®, CKA®

Mentioned In This Episode

Christian Financial Advisors

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Bob Barber, CWS®, CKA®

Mary Jo Lyons, CFP®, CKA®

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EPISODE TRANSCRIPT

[INTRODUCTION]

Bob: Welcome to Christian Financial Perspectives, a weekly podcast where we talk about ways to integrate your faith with your finances. This is Bob Barber.

Mary Jo: And I’m Mary Jo Lyons.

Bob: Are you ready to learn how to apply biblical wisdom to everyday financial decisions?

Mary Jo: Join us as we look at integrating your faith with your finances. If it’s your first time listening, welcome to our podcast, and if you’re a returning listener, welcome back.

Bob: Psalms 5:11-12, “But let all who take refuge in you be glad. Let them ever sing for joy. Spread your protection over them, that those who love your name may rejoice in you. Surely Lord, you bless the righteous. You surround them with your favor as with a shield.” I don’t know if you caught something in that scripture, but there was a word in there that we’re going to be talking about today and it was protection. We’ve discussed life insurance, disability insurance, and even longterm care insurance in some of our previous podcasts. And these are just some of the tools we use to help lower risk and protect you. So in return for that benefit, we’re required to pay for it. So in today’s podcast, we’re going to discuss basic household insurance, commonly referred to as property and casualty. Or you may have heard it referred as P and C for short. And this is insurance that covers your home, whether you rent or buy. It covers, your cars, your boats, your toys, and even yourself in the case of an accident involving your property, like a vehicle, or an incident that happens on your property, like at your home as a result of negligence.

Mary Jo: Another great scripture that I like that I think addresses this and speaks to protection and that Psalm 32:6-7. “Therefore, let all the faithful pray to you while you may be found. Surely the rising of the mighty waters will not reach them. You are my hiding place. You will protect me from trouble and surround me with the songs of deliverance.” We often think of insurance as protection for that reason. It protects us from trouble. Insurance. It’s one of those things we know we need, but we always seem to buy it reluctantly. It’s kind of that sunk cost, if you will, just fighting that concept.

Bob: I know I am because it costs so much cause I’m protecting so much.

Mary Jo: Well, it’s something you may not ever need. Let’s hope we don’t need it.

Bob: Exactly.

Mary Jo: But we’ve got some stories to tell you. So, some of us may view it as a necessary evil. Some may view it as a commodity and not to shop on price alone, but we view it as a necessary component of your financial wellbeing. Some insurance, it’s more than just insurance. It’s real protection. It’s peace of mind knowing that you, your loved ones and your worldly goods are covered and we hope after listening to today’s podcast you come away with a different perspective when it comes to property and casualty insurance.

Bob: When it comes to insurance, we always recommend at least doing an annual review. Even a semiannual review is great to make sure that you have the right policy or coverage at the best price, cause we live in an ever increasing what we call a DIY, do-it-yourself, culture. Nearly everything we need today we can find it online. You can do that with insurance. There’s a YouTube video on how to do just about anything, but when it comes to insurance, are you really better off going at it alone or does it pay to use an expert? If so, what’s the cost of working with one? I believe, myself personally, and I know Mary Jo does too, that working with an experienced person when it comes to insurance coverage is definitely worth the price in the long run, especially when you really need it. After all, in that time of crisis, it’s not about the price but it’s the coverage, and if you’re covered or not cause you may not be covered if you’re just buying it online and you really don’t know what you’re buying. You can find insurance agents that are captive to one company or ones that work with many different companies. These are usually called independent agents. Both had their merit. So when doing an annual comparison, check with both of these types of agents to ensure you’re covering all your bases. Another best practice that we like to recommend is to review the terms and definitions of all your policies. Make sure you understand the fine print. For example, do you know the difference between a binder and a rider? Probably not, but a binder is an in force acknowledgement, usually from the agent. A rider usually provides an additional benefit over what is described in the basic policy in exchange for a fee payable to the insurer. I hope you got all that.

Mary Jo: Well, you know, Bob, I think it’s pretty simple in that when you first talk with an insurance agent, before you send in the bill, you’re covered. Okay. Once they establish the policy, so there is a window of time where they’ve clicked the button on the computer, they’ve got you covered, but you haven’t actually sent in your premium yet.

Bob: I think that’s a great way of saying it.

Mary Jo: That’s when your binder is protecting you. It’s binding the insurance company to protect you.

Bob: That’s right.

Mary Jo: And the other, a rider, you think about it on your homeowner’s policy. A lot of people may have a rider for jewelry or guns or collection or a custom car that’s in the garage, so they need a little extra coverage for something in particular, and they’ll put an additional rider on their policy to make sure that happens. Those are fairly common things, but a lot of people don’t really understand what they mean.

Bob: Yes. Thanks for making that a little more clear to our podcast listeners because there’s a lot of technicalities that we’re going to get into today.

Mary Jo: There are, but before we get into the nuts and bolts on the insurance policies, let’s first talk about claims and the paying of those claims. This isn’t all that important until you actually have a claim, and then it becomes very clear, very fast that it’s so very important. In fact, it’s very, very important. I’ve had two situations where it made a huge difference. And if you’ve been listening to the podcast for a while, you’ve heard me talk about being impacted by hurricane Harvey here in Rockport. What a lesson that was when it comes to homeowners insurance, flood insurance, and windstorm insurance. This is when working with a trusted insurance agent, as well as a trusted agency, really paid off. You’ve probably heard me share my husband and I’ve had a condo in Rockport prior to Hurricane Harvey, as well as a boat that we kept in a dry stack storage, and we lost both of those in the storm. The entire condominium complex had devastating damage that required taking each unit in the complex down to the studs and basically rebuilding it from that point forward. Luckily, our homeowners association had its own coverage for this, as is required in the bylaws of the condominium association. However, as a condo owner we’re responsible for our own personal contents and we were lucky, we had good coverage with a reputable carrier.

Bob: I want to say something in the middle here, because we had a condo down there too, cause y’all bought our old condo. I remember talking to you about that, and I remember talking to so many of our homeowners. They didn’t have their personal content coverage, and that’s crazy cause it was worth so much money, but everything else was covered.

Mary Jo: That’s true, Bob. We bought your condo but we had a condo at the time, which we sold to some other friends. And in that conversation, in the transactions that happened after that, I never realized that they didn’t know they needed to have their own personal contents insurance. And we just happened to be talking, and I was telling him how I just updated our contents policy on the condo and he looks at me and he goes, “What are you talking about?” And I said, “Well, you know your contents policy for your condo.” And he goes, “I didn’t know we needed that. I thought the HOA covered that.” And I had to go back and explain to him. He goes, no. Well he went out the next day and got it. And you know, Hurricane Harvey hit less than six weeks later.

Bob: Oh my goodness. Wow. Wow.

Mary Jo: So we’re even better friends now.

Bob: Well, hopefully somebody who’s listening to our podcast, they know they need to get that coverage now because you never know.

Mary Jo: We’re using this as a story and there’s more to come on that simply because we know that a lot of our listeners, they’re retired or they’re nearing retirement and they could very well be considering a condo purchase in some other area of the country or as a second home or something like that. So, there is a lot of things that you need to be aware of. When it came to our claim on our condo after the hurricane, all I had to do was submit a claim with a detailed list of the items lost. I acted pretty quickly. I got it in in short order and included everything that was damaged due to wind and rain intrusion, which was pretty much everything in the condo because the roof came off and so that compromised everything. Everything that was material or soft goods in the condo. We got a check from our insurance company with no questions asked.

Mary Jo: When it came to our boat that was in the boat barn, it had basically imploded. Our boat, normally stored on the third tier, was now on the floor at the bottom of a heap of other boats. The motor had been ripped off the transom and the hole was compromised. All the insurance company requested was a picture. Once we were able to provide the picture, we again received a check for the value of the boat and the boat trailer. In fact, we received our coverage limits for both the condo contents and the boat and the boat trailer without any debate, without any discussion, with no back and forth argument with our agent. They just covered us.

Bob: That’s cause you had a good agent and a good agency.

Mary Jo: We did. They acted swiftly and in good faith during a time of crisis, which is what you want. I just can’t tell you how grateful we were for this. So many of our neighbors are still in constant battles with their insurance companies. Some of this went on for over a year and as I mentioned, some of it’s still going on. You just think about the stress that created.

Bob: Gahlee. Yeah, I know. And seeing all that, and so many of us in Texas that listened to the podcast can remember Hurricane Harvey, not only how it hit Rockport, but then it went on to just hover over Houston for such a long time and doing all the devastating flooding.

Mary Jo: Oh, absolutely. It’s affected so many in our area. Another incident was I had a terrible car wreck a few years ago. A woman was driving while distracted.

Bob: Was she texting?

Mary Jo: Yes, she was.

Bob: Oh no.

Mary Jo: And I was two blocks away from my house. She ran a red light and she T-boned my car right between the front door and the rear door on my side of the car, on the driver’s side, and the EMS came, the fire department and the door was sawed off in order for me to be able to get out of the car. I was crying hysterically. I was just so traumatized. I was in shock, and I didn’t think I could even crawl out of the passenger side cause there was this big console in the middle, and I didn’t know if my back was injured or how badly I was hurt. I was just that upset. Needless to say, my car was also in pretty bad shape, but one call to my agent and I knew I was in good hands. I guess that’s why one prominent company uses that saying as a marketing slogan. It’s very descriptive and certainly tells a story. And this incident was another lesson learned. So when repairing vehicles damaged in accidents, did you know that insurance companies can argue that it’s not necessary for you to have what are known as original equipment manufacturer parts or OEM parts? I didn’t even know there was such a thing, but I learned it in this situation. They argue that the use of lookalike aftermarket, non OEM or generic crash parts, significantly contribute to holding down the cost of repairs and it’s what helps keep insurance premiums low. They claim it’s in the best interest of both the insurance companies and their insured, so they allow for the use of aftermarket parts in the repair of damaged vehicles. However, as a society, we’ve got to balance the cost with the safety and the integrity of those generic parts. So let’s look at this in a little bit more detail. You have a relatively new vehicle. You feel really good about driving it. When you selected the car, you were buying more specifically, instead of you were looking for high quality safety features and high marks in safety tests. Now, all of a sudden, you’re in a car accident. It wasn’t your fault, and your poor car in in tatters. Fast forward to the repair shop. Your insurance company now won’t pay for original equipment manufactured parts, and now you’re forced to replace parts that may or may not have the same quality that you originally had in the car. So you lose, yet again, in the repair of your car. Now you feel like you are truly assaulted. At least that’s how I felt. So working with discount auto insurance providers, it’s often the case. Sometimes paying a little higher premium, it might be worth it, and you have to look at the terms of your contract. That’s the bottom line. You need to know what you’re getting. And since we’re talking about cars, we can use a car analogy. You need to look under the hood. It’s an interesting debate, but I don’t want it to be at my expense. So the point is when shopping for insurance, the monthly premiums are not the only cost to consider. The claims paying reputation is a huge component of your decision. Bob, I’m sure you have an insurance story to share with our listeners.

Bob: Well, you just wore me out. Listen to your’s.

Mary Jo: Yeah. And there’s even more, but I’ll save it.

Bob: Oh my goodness. Now, Mary Jo, I don’t know if I’m going to want to get in the car with you again.

Mary Jo: But you know, it was such a lesson.

Bob: Yeah, yeah. Wow. So all pun intended, y’all, when we were making the podcast, Mary Jo goes, so Bob, what’s your insurance story? And I said, you know, I really don’t have one. I mean, when I was 16 my dad bought me a car and within about three or four months, and as goofy as I was when I was 16, I wrecked it. I got another car. So I guess the insurance company took care of it and I went on with life. I just, I don’t have any stories like that.

Mary Jo: Well, you did have three teenage drivers, but they were all girls.

Bob: They were good, too. So, maybe I don’t have one, but those that know me well know that I strongly believe in what’s called Murphy’s Law. And that’s a mindset I have that if I prepare for the worst, it probably won’t happen. But if I prepare for the least, it probably will. So I’m a strong believer in always being prepared for the worst. And you know, it probably goes back to the podcast we did about three or four weeks ago when what happened to our money story and my dad and the worst happened, you know, with the real estate market dropping. I look at that and I look at the same way when I’m buying my coverage. So I always try to get the best. Never do I buy on price, but I buy on protection. Property and casualty, or P and C insurance, generally contains two types of coverage. There’s liability coverage and there’s property protection coverage. P and C is an umbrella term used to describe a number of different types of insurance coverage. So we got homeowners insurance, we’ve got condo insurance, which is what you were describing that protected y’all in Hurricane Harvey, or co op insurance depending on the type of organization or ownership structure. There’s also renter’s insurance, which is if you’re in an apartment or if you’re in a rental home, you’ve got your contents that you want coverage for. So, that’s renter’s insurance. Then we spoke of auto insurance and then there’s insurance for like a recreational vehicle, ATVs, etc. So let’s look at what to consider when choosing insurance coverage for your home and your auto.

Mary Jo: So let’s start with auto coverage. First, let’s look at what auto insurance is. Like most other forms of insurance, it’s a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft involving the covered vehicle. The insurance company agrees to pay your losses, as agreed to in the policy, in exchange for you paying a premium. If you’ve been in an accident or you have young drivers, it’s likely that you’re familiar with the basics regarding automobile insurance coverage. But for those that may not be familiar, we thought it’d be helpful to do a review of the basics. So when preparing for today’s show, even Bob and I learned a thing or two. Auto insurance provides coverage for property such as damage to or theft of your car. It provides for liability, as Bob mentioned, your legal responsibility to others for bodily injury or property damage. And medical, the cost of treating injuries, rehabilitation, and sometimes lost wages and funeral expenses.

Bob: Most States in the U.S., they mandate that if you’re a car owner you’re required to purchase or to carry basic auto insurance. And also if you’re financing your car, your lender that they have their requirements as well. So there’s several common components that we’re going to go over for most insurance auto policies that you really need to look at and these are line items. Now I want to mention as we go through these that you can always go to christianfinancialpodcast.com and pull up this particular podcast. There’ll be a script in there and it’ll have all this listed for you, but these are some of the things that you want to make sure you’re looking at and how much coverage you have. Number one is bodily injury liability, which covers costs associated with injuries or death that you or another driver causes while driving your car. Another one is property damage liability. Now this reimburses others for damage that you or another driver operating your car caused to another vehicle or other property such as a fence, building, or utility pole. Say you hit that fence if you drive off the road too fast or something, so that’s going to cover you there. Third is medical payments. That is so important – medical payments, personal injury protection. They refer to this as PIP and that provides reimbursement for medical expenses for injuries to you or your passengers. And you know I’ve seen really low numbers here and it’s not much more expensive to raise those numbers. I mean raise them even 10x the amount. Mary Jo, what I mean by that, I’ve seen medical payments as low as just $5,000 and you can raise it to $50,000 and it’s just a few dollars more. It is really cheap, and it covers lost wages and other related expenses. Like I say, this is required in most states also.

Bob: Then the fourth thing is collision coverage. This pays for damage to your car, resulting from a collision with another car, which is what most of us buy insurance for, or another object such as a tree or a telephone pole or result of flipping over. In Texas, it’s helpful to know that collisions with deer are covered under comprehension because there’s deer everywhere up here in the Hill Country. It also covers damage caused by potholes. Then another one is comprehensive coverage. This one reimburses you for loss due to theft or damage. So if somebody steals your car, it’s going to be covered or something caused by something other than the collision with another car or object. Comprehensive also covers events such as fire, falling objects; I saw one of these the other day on the weather app. A car was driving along and here comes this big boulder, and it just kills the car. It also covers things like that – falling objects, missiles, explosion, earthquake, windstorm, hail, flood – we have a lot of hail storms up here in Central Texas – floods down there on the coast, vandalism, riots, or even contact with animals such as deer or birds. It also pays to repair your windshield if it’s cracked or shattered. The last thing is uninsured motorist coverage. That reimburses you or a member of your family or a designated driver if one of you is hit by an uninsured driver, and there’s a lot of that going on today, or a driver who doesn’t have sufficient amount of insurance to pay for the total loss. This coverage also offers protection in the event a covered driver is the victim of a hit and run or as a pedestrian you are struck by a uninsured or under insured motorist.

Mary Jo: Some of the common things to know and be aware of when looking at auto insurance, did you know that your credit rating impacts the amount of your premiums. Since the insurer is assessing their risk regarding your ability to pay your premium, this is a tool they use to look at your credit worthiness. So, that’s another reason to keep those credit scores up. Auto insurance coverages are priced individually or a la cart. This allows you to customize coverage amounts to suit your needs and your budget. Collision and comprehensive coverages generally have a separate deductible. Policies are generally issued for six month or one year time frames. Those policies are generally renewable, but they can be canceled if you become a high risk to the underwriter or the insurance provider. They are pulling those driving records. Another thing I could speak to you from experience, but that was way back in the day.

Bob: You even get penalized, though, even if you’re not at fault.

Mary Jo: Oh, that’s right. Absolutely. Your auto policy will cover you and other family members on your policy, whether driving your car or someone else’s car with their permission. Your policy also provides coverage if someone who is not on your policy is driving your car with your consent – loaned it to a friend or a family member. Your personal auto policy only covers personal driving, whether you’re commuting to work, running errands, or taking a trip. It will not provide coverage if you use your car for commercial purposes. For instance, if you deliver pizzas in your spare time.

Bob: So if you’re an Uber driver?

Mary Jo: That’s the next one, and that’s very timely. Personal auto insurance will also not provide coverage if you use your car to provide transportation to others through a ride sharing service such as Uber or Lyft. Some auto insurance, however, are now offering supplemental insurance products, at an additional cost, that extend coverage for vehicle owners providing ride sharing services. So if you know anybody that’s driving for Uber or Lyft, and as it turns out, I have clients that are doing it, I have family members that are doing it, and I hope they’ve got the right insurance.

Bob: Well, I’ll tell you what makes me think of something while you’re talking about that, Mary Jo, is that, well, you know we just went to Florida a few days ago and instead of getting a rental car, I used to Lyft three different times, and I was just thinking about what kind of coverage did I have just being a passenger.

Mary Jo: We were in New York last week and in Montreal and we used Uber everywhere and we didn’t think about that either.

Bob: So that just made us think about it while we were making the podcast. A good thing to think about that we all probably need to look at as so many of us are using one of those two services when we go to a big city and we’re riding around and we need to know what kind of coverage we have on ourselves. That really covered auto insurance in a good way. I mean we really got detailed, but we meant to do that to help you. Again, we want to emphasize there’s a lot of detail here, so go to our podcast website and pull up our script and you’ll see all that information that we went over. So next, let’s look at homeowner’s or renter’s insurance. Just like there are a lot of aspects to consider when choosing the right automobile coverage, there’s also a lot to know and understand about your homeowner’s or renter’s insurance.

Bob: A typical homeowner’s policy covers your belongings and/or the expenses of another individual injured in an accident occurring from your negligence. Property and casualty insurance also provides financial protection in the event of a covered weather incident. So remember to read your insurance policy closely for exact details. What types of weather and natural disasters are covered by homeowners insurance and vary according to where you live and what type of insurance coverage you have. Again, read your policy very carefully to fully understand what is covered and not covered. Many people in our listening area can tell you just how important that is. What is typically not covered is wind damage from a storm. Think tornado and/or hurricane, damage from rising water is also usually not covered, so think flood. And Mary Jo, another one I was thinking of that is not covered, like here in Central Texas, is earthquake insurance, but we have so many quarries around us that make the ground shake like crazy when they’re letting off their explosions throughout the day to get the rock out of those quarries. We’ve got earthquake insurance on my building here.

Mary Jo: You know, that’s so interesting. It’s not even something we think about in Texas, but if you’re in other parts of the country, you do need to think about that.

Bob: And if you’re in an area where they do a lot of fracking,

Mary Jo: Oh yeah, things change.

Bob: Yes, they do.

Mary Jo: Another thing to consider – a lot of our listeners, they live in what I’d call a concrete jungle. What this means is the potential for flooding, it’s getting worse and worse in areas of continual development. Take Houston and Austin, for example. We were in New Braunfels and Austin yesterday coming home from our seminar that we attended, Bob, and it used to be back in the day that between Austin and San Antonio there were a lot of little individual towns like New Braunfels, like San Marcos, but now it’s just wall-to-wall.

Bob: It’s all concrete. They’re taking up every piece of land that they can. Every square foot they see, let’s build something on it.

Mary Jo: The more concrete they pour, the more houses they build, the more streets they pave, the less green space there is, the less ground to absorb rainwater. This can wreck havoc in our neighborhoods and when we get hit with heavy rains both in the spring and fall, it causes trouble. Just look at the flooding we’ve seen recently in Houston. I also recall that tragic event a few years ago in another of our listening areas. I’m sure, Bob, you heard all about this on Memorial Day weekend in 2015, the Blanco River rose to a record 40 feet. The swift rise of the water is known as a flash flood. It’s a term familiar to us Texans. The Texas Hill Country where Wimberley is located is known as “flash flood alley”, and that storm destroyed 350 homes and claimed 13 lives. It was a tragedy of untold proportion.

Bob: Yes, it was. Some of those lives were people in our own church.

Mary Jo: This story, it has so many angles, but for the purpose of the podcast today, we’re using it as an example of how important it is to protect our property. Anything is possible. Flood insurance is becoming a must have for homeowners in our area. In our home in Houston, we were told we lived in a 100 year flood plain. The land in a 100 year flood plain has a 1% chance of flooding in any given year during a hundred year storm. Well 1% that’s not very high. So you never even think about needing flood insurance and we didn’t buy it. We were told we didn’t need it. Yet, we had a levy at the end of our street that was from the Brazos River. We came extremely close to flooding in that Memorial Day flood of 2015, then again due to Hurricane Harvey. It was one block away, that high water. Many of our neighbors were not so lucky. They flooded both times. The point here is to realize that your typical homeowner’s policy does not cover damage due to rising water. After Hurricane Harvey, that was the first thing we did. We bought flood insurance for our home.

Bob: This reminded me of something, Mary Jo. You know, we live here in New Braunfels, and we used to live right across from the Guadalupe River. We built our home one foot above the 100 year flood plain. So, we didn’t need flood coverage, at all, and we didn’t get it. And that was back in my younger years where I didn’t think I needed coverage. You know, I was all about saving money versus getting coverage. Now I could of had a story, but I didn’t. We sold that home about six months before that major flood came and we remembered seeing that home on the news. The water was in the second story of that home. So, there’s an example. Somehow, I get away from these things, you know, six months before that flood and six months before the hurricane came through. The Lord just spared me for some reason. So another risk in Texas, especially along the coast and areas prone to tornadoes, and that’s windstorm insurance, another policy worth its weight in gold. And if you’re unfortunate enough to be impacted by a hurricane or tornado, you definitely need that. If you’re going to own property, we encourage you to think long and hard about your total housing budget. This should include the cost of insurance protection. Don’t just think about the cost of the monthly or annual premium. Think about the cost of not having the needed coverage when disaster strikes. I’m sure there are a lot of families living along the Texas coast that can tell you how much they wish they had thought to have the proper insurance coverage in place after Hurricane Harvey. That’s so unfortunate, you know, to even say that. Given this history, be sure to look at loss of use coverage. This is in case your place becomes uninhabitable. And Mary Jo, I’m thinking about the condos down there and how many people needed to rent those condos.

Mary Jo: Yep.

Bob: That’s what they were relying on, and they’re still not back up and running a couple of years later and they’re still missing out on that. So, while we’re talking about homeowner’s insurance, let’s look at condo and co-op policies and things you need to consider if this impacts you. As a condo or co-op owner, you’re only responsible for the stuff from the sheetrock walls inward, including built-in appliances, bookshelves, etc. Homeowners, on the other hand, are responsible for the entire structure. So common areas such as stairways, elevators, laundry rooms, water pipes, electrical wires, roofs, along the building itself, surrounding grounds, all fall under the HOA’s master insurance policy. This also includes fish cleaning stands, swimming pools, and tennis courts. Picture it this way. Take a condo, turn it upside down. What falls out is your responsibility for covering. What stays in there, the HOA is responsible for. This is a general rule of thumb and another great lesson learned from Hurricane Harvey.

Mary Jo: That poor storm. It’s getting blamed for everything, but what lessons we’ve learned from it.

Bob: Well, it’s one of the biggest ones in 50 years to hit – 50 or 60 years, so we still remember it.

Mary Jo: Yes, absolutely. As I mentioned earlier, many of our podcast listeners are retirees or those planning to retire soon, so this is one of those FYI’s that maybe it doesn’t impact you now, but you might have a family member or it may in the future. These are some important things to consider. If you’re thinking of purchasing a condo or you’re involved in the homeowner’s association of any kind, make sure you fully understand the scope of the insurance policy that they are supposed to provide for the members of the association. Around here in Rockport, not every condo association had a good policy in place. Some of them didn’t even have coverage. Some things that are important when looking at a homeowner’s association policy, you want to look at the master policy. Is it a bare walls policy or an all-in or all-inclusive policy? And we’re going to talk about some of the things that that may mean to you. The all-in policy covers any upgrades to your unit. This type of homeowner’s association policy includes full restoration of your unit to the condition it was just prior to the covered loss. This includes any custom finishes, built-ins, etc. It was really interesting because our complex was built in the 1970’s. It was all wood. It was all cedar. It had no upgrades from windstorm coverage in recent years, but we had done a ton of renovations. As you know, that unit was completely customized inside and out. So was our insurance coverage from the HOA gonna cover all the upgrades in what we bought? Actually, it did.

Bob: Oh, did it really?

Mary Jo: It did, and we were so fortunate. Man, that was the hand of God, but it was also due to our treasurer. He was a nuts and bolts kind of guy, and he bought us a great policy. Thank you, Tom. I’ll have to make sure he listens to this. So the policy did cover all the upgrades in the unit. Again, a plus. You also want to be aware of the deductible of the master policy. Does the HOA have enough cash reserves to cover this in case of a claim? If there’s a policy, they can’t dip into it. Hopefully in the bylaws that’s spelled out. So what if they had those funds set aside and then they decided, “Oh, we need to repave the parking lot,” and they dipped into those funds for something and then it wasn’t there when it was needed? If you’re on a board, these are some things to think about. Again, what is the age of the complex and the type of materials used? Is it cedar siding or hardy board siding? Is it brand new and up to current windstorm requirements or is it 50 years old? So, all those things play in. Another interesting thing is assessment coverage. This may or may not apply to normal assessments or catastrophe assessments. Some of these condo owners are getting hit with huge assessments, some over $25,000.

Bob: Wow. That’s a lot of money.

Mary Jo: And that’s just the first one. You also want to know is it going to be replaced with actual cash value or replacement cost value. And as we talked about earlier, loss of use coverage. Are you planning on renting your unit and if so, will a loss of rental income be covered during a disaster? We’re two years out, and those owners still are not able to get back into their condos.

Bob: As I’m listening to this, I think we need to send this podcast to HGTV for beachfront property.

Mary Jo: Oh, there you go.

Bob: Because they don’t realize all these things that they need to be looking at when you’re looking at properties, especially in areas that are prone to have a hurricane or flood or fire. I mean, oh gosh, think about California and all the fires that have been out there.

Mary Jo: Absolutely. Just a few months before the hurricane, we had had a fire in a unit and those owners were out for quite a while. You also want to look at increased cost of construction or ICC coverage as it’s known. Does the policy only cover what it would take to bring the building back to what it was when you purchased it or will it also cover the increased costs due to updated code requirements? That’s one of the things after the recent storms. Codes in our cities and towns are so much more stringent, and so many properties around here if they had more than 50% damage, they had to raise them six feet. So that’s a new code requirement that meant completely rebuilding. So do you have that kind of coverage? Just think about all the condo complexes that were impacted by the recent storms and imagine the financial impact of being told you had to bring the whole building up to code in case of a disaster such as a fire, a flood, or hurricane.

Bob: Well, as we’ve been going over this. I’m thinking about this. You need a checklist.

Mary Jo: You do.

Bob: We’ve been covering all these things that you need to think about, but as I’m listening to this and then I’m thinking from our listeners’ perspectives, unless they’re writing all this down, they really need a good checklist. Again, I want to say, we’re going to put this on our podcast’s website. So it’s got this checklist that you can look at and go into. You’re going to be glad you did, especially if you have something bad happened. Try to look at it like Murphy’s Law, but have the coverage and hope it doesn’t happen. Gosh, we’ve covered a lot, but before we go, we really need to look at one last thing, and that’s the icing on the cake. It’s one of the things I consider actually one of the most important types of insurance coverage, and that’s umbrella liability coverage. One of the most overlooked, yet most important, insurance coverages is an umbrella liability policy.

Bob: I have a really good one for myself. Just think of it as an umbrella over all your policies. It’s for extra liability insurance coverage that goes beyond the limits of your basic home, auto, or watercraft insurance. In today’s sue happy society, this is extremely important. Everyone’s quick to find fault with someone else and quick to sue for damages. So umbrella liability policy provides an additional layer of security to those who are at risk for being sued for damages to other people’s property or injuries caused to others in an accident. It also protects against libel, vandalism, slander, and invasion of privacy. An umbrella policy is very helpful when the insurance owner is sued and the dollar limit on the original policies have been exhausted. The added coverage provided by that liability insurance is most useful to individuals who own a lot of assets, are very expensive assets, and are at a significant risk for being sued.

Mary Jo: I take it a step further to say that most middle class families should consider this type of coverage.

Bob: I would too.

Mary Jo: Let’s look at some common everyday situations. Do you have any of the following? Kids that play in your yard; a dog, especially a dog that’s at risk of biting someone;

Bob: I want to say something in there before you go on. Okay. Our oldest daughter, Jenna, that helps with this podcast and she’ll hear this as she edits our podcast. When she was very young, she was playing at one of her friend’s house, and Jenna loves animals, and the dog bit her right in the face, and the insurance policy came in and helped pay for the doctors and we got her with a great doctor, and she looks fantastic today. You never could tell that a dog bit her in her forehead, but I’m glad that they had coverage for that.

Mary Jo: Think about how many stories you hear about pit bulls attacking people. That’s just scary to think about. Do you have a sidewalk in front of your house? Do you live in an old house that has exposed tree roots? Somebody could trip on that. Do you have teenage drivers? That’s a story in itself and I don’t think we have time for that, but if you’ve got teenage drivers, you need a liability policy. And do you have drivers of any age that are at risk of driving distracted? And who isn’t guilty of this? Do you have a boat or a personal watercraft? A pool or a trampoline? These are what are known as attractive nuisances and even if you have a fence on your property, these can attract the attention of the neighborhood kids, and you are liable if an accident happens on your property, even if you didn’t invite them on your property. It’s kinda like an invitation to come play, and you have to protect yourself. So, having this additional coverage is critical for our homeowner today. You get the picture. The larger your footprint, the more risk you have. I heard this interesting story just a few weeks ago. I’m sure some of our listeners may have heard about it, too. I watch Shark Tank all the time. It’s one of my husband and I, it’s one of our favorite shows.

Bob: I love that show too.

Mary Jo: Did you hear about one of the sharks was involved in a boating accident in Canada and it left another person not only injured but a passenger in the other boat was killed? A very unfortunate story, but it’s a great example of how a high profile individual, a likely target of a potential lawsuit, was involved in an activity with a high risk level. Well, I’m sorry to hear about it, but I’m guessing they were very glad that they had liability coverage in that situation and if it were to happen to you, you would want it too.

Bob: I sure would. In the end here, we’ve covered so much about protection and are you protected? You need to get a good insurance agent. Now, Mary Jo and I, we don’t sell a property and casualty insurance, which makes it even more fun to do the podcast because we really don’t have a vested interest in this, but we do have a vested interest in you, our listeners, to make sure that you’re protected. We’ve looked at property and casualty insurance primarily from an individual’s perspective. However, if you’re a small business owner, it’s extremely important as well. The right P and C coverages can make a huge difference when it comes to protecting yourself and/or your business. So remember, when it comes to your personal insurance, your premium is a small price to pay when it comes to true protection.

[CONCLUSION]

Mary Jo: You’ve been listening to Christian Financial Perspectives. Join us next week as we explore more about how to apply biblical wisdom to your financial situations.

Bob: To make sure you don’t miss any of our podcasts, you can subscribe to Christian Financial Perspectives on iTunes, Google Play, or Stitcher. To learn more about integrating your faith with your finances, visit out website at ciswealth.com or call 830-609-6986.

Mary Jo: That’s all for now until next week.

[DISCLOSURES]

Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors, a registered investment advisor.

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