There have always been risks, and Lloyd’s of London began insuring them in 1688. They’ll provide coverage for just about anything under the sun from body parts, to voices, natural disasters, and even kidnappings by aliens. Celebrity leg insurance is one of the more well-known policies, starting in 1940 with Betty Grable purchasing $1 million of coverage to our modern day David Beckham, with a reported $70 million policy.
Most people, however, lead much more normal lives and merely carry homeowners and auto policies. These types of insurance are package policies, meaning that they cover both damage to your property and your liability should you or members of your family injure or cause property damage to someone else. The next most common type of insurance for Southern California residents is earthquake. This insurance is easily available and regulated by the state of California. Another common form of insurance coverage is an umbrella policy. This coverage is often overlooked, because it requires that you maximize your home and auto coverage before it can be purchased. It is quite inexpensive, however, and I highly recommend that you talk to your insurance agent about its benefits.
Most people’s awareness and exposure to insurance ends right there. However, there is a nearly endless array of specialty policies available. Let’s look at a few that are typical for this local area and its demographics.
While insurance policies are known for the clever exclusions, fire is one of the most basic areas of coverage and included in most standard home, renter, business and auto policies. Where people come up short on their coverage is failing to account for code changes, your renovations or add-ons, or today’s higher building costs. It is also important to have coverage for the contents of your home at replacement value. For example, if your old computer is worth $100, your current policy might not cover the $1,000 to replace it, but merely cover the $100 current value. Also, make sure your policy covers your landscaping and the extra cost of living in an hotel and eating out while your house is being rebuilt. One of the areas not covered is the land value. If a neighborhood is ravaged by a fire and the property values drop because of the extensive damage, homeowners are not covered for this loss in value. To secure the highest reimbursement, it is a good idea to video-record your home and all its internal contents. Store this in your safe deposit box or remote office (not at a neighbor’s) in case you need to prove your claim.
While most Americans only read about mudslides, we Californians need to seriously consider them. With homes often built on, or near, hillsides and the combination of wildfires and El Nino, we need to be mindful of the risk. The standard homeowners policy does not cover flood, mudslides and landslides. If you desire such insurance you generally must purchase it through the federal government’s FEMA program. Further, you can’t just pick up the phone and secure the coverage. It takes time to purchase, and there is usually a waiting period until the coverage begins – so plan ahead.
If your wine is covered solely by a traditional homeowners policy, you may be surprised by the meager coverage. Further, if your wine is stored away from your home, your coverage may be even more limited. To obtain full value coverage for fire, theft, earthquake, breakage, water damage, and more, you generally need a special policy. Many specialty policies even cover accidental dropage or unauthorized consumption.
Owners and operators of an aircraft both share liability. It is generally the aircraft operator that obtains the insurance policy. Most owners require that the insurer have an “A” rating or better from A.M. Best. Further, the owner should review the policy, making certain that it covers their key areas of liability. A last important step for the owner is to make sure to periodically request a certificate of insurance to make certain insurance is in place and evidencing that the necessary protections are in place.
High value horses have problems all their own and specialized insurance is available to cover their risks. The main risk is generally mortality – the animal dies due to accident, illness, or disease. However, theft and loss of use are also typical. Since many of these animals are transported around the world for shows, races, or breeding, transportation coverage is also common. Additional coverage can be purchased for stallion infertility, broodmare barrenness, and even the unborn foal.
Most businesses and non-profits have insurance that covers their risks, but many fail to provide adequate coverage to those who serve on their boards. While most companies do provide traditional Directors & Officers insurance, it may not be enough in today’s litigious world. Independent directors and board members should consider additional personalcoverage designed specifically to protect their personal assets.
Collections can range from paintings to antique weapons to taxidermy. Specialty insurance can be obtained to cover your personal fine art or collectibles. Additional coverage is available for any portion of your collection that may be part of an exhibition or on loan to a museum. Many insurance companies are even happy to send a specialist to evaluate and suggest better ways to protect your fine art from theft, fire, water or light damage.
Kidnap and Ransom
The U.S. Department of Justice states that there are over 1 million cases of forcible entry of residences, almost 1.5 million stalking cases, over 50,000 carjackings, and between 3,000 and 5,000 cases of non-family-related abductions that take place annually. The average cost of a carjacking, stalking or home invasion is $38,000, yet ransom demands can run into the millions. Several insurance companies offer policies that address all of these threats. Kidnapping is a billion-dollar industry around the world, frequently run by well-trained teams. Some policies not only cover the ransom cost, but also provide an experienced response team to work with you for the safe return of your loved one. Americans traveling overseas, especially in eastern Europe and Latin America, are often preferred targets. Demands as high as $20 million are not uncommon, but ransom settlements are often 10-20% of the demand.
So while you may not be one of the 40,000 people who have purchased alien abduction insurance (you’ll need to pass a polygraph, have photographic evidence, and a witness to collect the money), I’m sure there are areas of risk exposure in your life for which you should consider additional or specialty coverage.
Robert J. Katch is the founder of Manchester Financial, an Investment Counsel/Wealth Management firm located in Westlake Village. For more information call 805 495 4405
This Article appeared in the Nov/Dec 2009 issue of Westlake Malibu Magazine.