Avoid Self-Insuring and Talk to Your Agent

In the wake of the economic conditions, individuals are more exposed to financial loss related to uninsured claims because of dropped coverages, reduction in coverages, or late payments causing a lapse in coverage. This unfortunate result of a mass fear of worsening economic conditions perpetuated by, in my opinion, the very negative press is causing, in some cases over reaction by businesses and consumers to cut-back, layoff, and overall just sit on their hands.

Consumers today are scared. They are operating in an almost panic mode and cutting cost ever way they can. Many of the cost cutting measure I support, after all if there is a silver lining, it's that we will become better stewards if our money. However, one trend that we are seeing in the insurance industry is non-mandatory insurances are being let go while other coverages are being reduced.

Mandatory Insurance is insurance that is required by law or by contract. Some examples include;
• Car Insurance
• Home Insurance
• Some Flood Insurance
• Workers Compensation Insurance
• And General Liability Insurance that a business must carry for a landlord, client, or vendor.

These are just a few of the Mandatory Insurance that need to be kept in force and the alternative will certainly be more expensive. The consequences of dripping these coverages include, force placed coverage that could cost more than double the cost and for half of the coverage, state fines, penalties and suspensions, breach of contract, and lost business.

Then there is the non-mandatory coverages that can have a substantial financial impact when coverage is altered or flat out dropped or lapsed. They include;
• Insuring boats, motorcycles, jet skis, etc.
• Condo or Renters Insurance
• Umbrella Policies
• Health Insurance
• And reduction or deletion of Business Property coverage to offset costs.

The consequences here can be even more dramatic in the event of a claim brought against a business or individual, because there will be no warning letter from a lender, state agency, or contractor to warn you of the poor judgement. These decisions could lead to a self insured situation and can be financially devastating.

Don't get me wrong, Americans are hurting and so long as Americans continue with their spending contraction the more painful the economic environment could become. However, insurance is one of the factors that must be prioritized. If as a consumer you wish to take on more risk by dropping coverages that protect the assets you've worked so hard to accumulate, then in the end, the risk is yours.

My advise:
Prioritize Your Coverage: Home, Car, and Health Insurance need to be your first priorities. Maintain the appropriate limits of liability and property coverage. Increase your deductibles, especially on your Home Insurance; the savings can be significant between the different insurance companies.

The toys, rental properties and other coverages need to be evaluated based on your lifestyle and asset protection. However, as long as you own and use them, not insuring yourself against liability is outrageous. Losing a $5,000 boat, for example, is one thing, but a $300,000 lawsuit can wipe you out. Carry the correct limits of liability and insure the toys for physical damage based on your individual needs. You can also, increase your deductibles to lower costs.

If you own a business, the options might not be so obvious. All coverages provide benefits to your company and some, like Workers Compensation, are required by law.

My suggestion: stay in touch with your agent to discuss alternative options. You may consider shopping your insurance, or adjusting your payrolls, revenue, or inventory limits. These could all have a beneficial impact to your business without sacrificing coverage.