The Ins & Outs of Property & Casualty Insurance with Sarah Askren

[00:06:49] Dean Barber: Yes. Sarah, do you know what that reminds me of? It’s kind of like when you get the right financial planner. When you get the right insurance person, they kind of fall under that same oath that a doctor has, which is, first of all, to do no harm, right? So if somebody’s got the right coverage, we’re going to tell them they have the right coverage. If somebody’s got the right investment plan, we’re going to tell them they have the right investment plan.

If somebody has the right relationship with the CPA, we’re going to tell them not to change anything because they’ve done all right. The idea is for people to get comfortable with the fact that there are people like you and firms like Modern Wealth Management that are willing to sit down and take the time to analyze your situation and to make sure that it’s OK. If it’s OK, they can tell you that it’s OK. It’s not about a sales process; it’s really about a discovery process. And it’s almost like a checkup or a second opinion from a medical professional to say, “Hey, this is the news that I got from this other doctor. Are they right? Did they miss anything?”

[00:07:56] Sarah Askren: Exactly.

[00:07:57] Dean Barber: We’re in the middle now of doing risk management reviews right now. We like doing those during the first half of every other year to take another look at those life insurance policies. Do we still have the right amount? Is it still doing what we want to do? Let’s look at the disability, long-term care, health insurance, and Medicare supplement. And guess what? The property and casualty insurance, the home, the auto, the liability—all those different things that you look at—you look at for our clients as well. So, I want you to talk about what it is that you’re looking for first of all. Then, what are the big mistakes that you see people making in the property and casualty insurance side of things?

[00:08:41] Sarah Askren: I typically will look at a client’s home auto and there are various policies first to make sure that their dwelling is taken care of to the amount of the replacement costs versus actual cash value. We will do a review of making sure that they are appropriately insured with their autos and not at the minimums. We tend to steer away from the clients having minimums because it’s just not enough. Those are state minimums.

And then kind of the part working with a wealth manager is the umbrella. In the event something awful happens and you get sued, or your daughter is in a car accident that hurt someone else and the bills are outrageous, that your net worth isn’t tampered with. Because that’s what financial planners are doing. They’re trying to grow that nest egg. We’re trying to protect it. So, that’s one common mistake is a lot of clients don’t have an umbrella policy to cover their overall risks.

[00:09:49] Dean Barber: So, for people that may not be familiar with what an umbrella policy is, why don’t you explain that real quick?

[00:09:54] Sarah Askren: With an umbrella policy, you have your auto insurance, home insurance, and then you maybe have a valuables article policy. But an umbrella policy will cover all those things under your household that, in addition, will pay for the liability of, say, for example, your child was in a car accident with friend XYZ, and they end up in the hospital, bills are going up to $500,000, $1 million. The auto insurance covers up to $300,000 per person.

Your umbrella policy will kick in and take care of the additional insurance needs that that person needs. If someone gets hurt on your property and it’s above and beyond what your home personal liability covers, the umbrella policy kicks in. Some things that people don’t think about are if you’re on a board for a nonprofit and you’ve done something that’s not appropriate on that board, you could be sued. An umbrella policy will kick in also and help protect you and pay for those bills.

[00:11:12] Dean Barber: It’s just an extra layer of protection picking up where other policies would live off.

[00:11:16] Sarah Askren: Correct.

[00:11:17] Dean Barber: And are those policies expensive?

[00:11:21] Sarah Askren: No. For example, an umbrella policy for $1 million household could be $150 to $200.

[00:11:34] Dean Barber: A year.

[00:11:35] Sarah Askren: A year. For that extra $1 million in coverage for personal liability, I’m not going to say cheap, but it’s inexpensive.

[00:11:43] Dean Barber: It is. Anybody that has any degree of wealth should automatically include an umbrella policy in their property casualty insurances. You talked about the dwelling a little bit ago, which is the difference between the replacement value and the existing value of the home. I want to talk specifically about the massive increase in real estate costs that we saw happen after COVID-19. For some of these policies that somebody hasn’t looked at for four or five years, if they’re not written with a replacement cost, what happens if a home gets hit by a tornado, burns down, or something like that?

[00:12:30] Sarah Askren: For example, let’s say you have a policy that is written for actual cash value of $500,000 and your house burns down. To put your house as it was, is going to cost you now because of COVID supply and demand inflation is going to cost you $700,000, you will get $500,000 to build whatever you need. We will look if you haven’t looked at your policies for even just a year. I’ll be honest, it’s already gone up again because of COVID. You’re at a disadvantage. Instead of your deductible being $2,500 or $5,000, $10,000, you’re going to have to pay for more for your house because the money is not there.

But we do make sure our clients do replacement cost. We will do a replacement cost estimator and factor in inflation’s impact on the unique materials of your house and so forth. What has been going on the last couple of years has played a factor in that also. If you’re with a company, a high net worth company like Chubb, and the dwelling is $750,000, and it’s going to cost $850,000 just because it’s gone up in the last year. There are companies out there who will pay the $850,000 for your house to be covered.

[00:13:59] Dean Barber: What do you see most typically? What type of policy do you see most typically when somebody is coming to you and saying, “Hey, I want to make sure I’m covered properly.” Do you typically see replacement value? Or do you typically see cash value?

[00:14:12] Sarah Askren: I have been seeing replacement costs on there, typically from most carriers. Now, is the dwelling correct? Probably not. It’s a little low on a lot of the policy phase.

[00:14:27] Dean Barber: How would a person know that?

[00:14:29] Sarah Askren: They wouldn’t until they talk to their agent and have a replacement cost estimated out for them. Let’s say your house is worth $1 million. Once you do the replacement costs, it can be $1.2 million with today’s dollars. So, people kind of get caught off guard thinking their house is only worth $1 million. In today’s dollars and with the cost of goods now and everything else going on, it’s gone up to $1.2 million to replace that house.

[00:14:58] Dean Barber: When that happens, Sarah, does the insurance company say that the replacement value has increased. Do we need to increase the premium because the replacement value has increased? Is that done automatically or is that something that you have to get with your agent once a year to review the replacement cost? How does that work?

[00:15:20] Sarah Askren: Typically, it’s automatically going to go up with the high net worth carriers. They will do a replacement cost estimate on it every year. There are times that as an agent, I will look at it and review it with the client. If it’s a little too high, we work with the insurance carriers to see what we can do. But typically at renewal time, it will go up and the premium goes up automatically. So, yeah, most of them do that.

[00:15:48] Dean Barber: If a person were to look at their homeowner’s declaration page and wanted to know if they have replacement cost and if it’s done properly or if they’ve got an actual cash value, what would they look for?

[00:16:00] Sarah Askren: On their policy for dwelling A, it would say replacement cost. Some of the policies will have an endorsement on their policy that says replacement cost at 125%. So, they’ll have the replacement cost that stays the same on dwelling A, say, for example, $500,000. But then it will go up an additional 25% for that home because they bought the endorsement.

[00:16:26] Dean Barber: OK. So, let’s compare that to the automobile market right now. We’ve seen used vehicle prices increase by 35% over the last 12 months. I assume that people will oftentimes do a replacement value on their used vehicle as well. How is the insurance company looking at that? How are they treating that today? And what are they doing to protect themselves?

[00:16:59] Sarah Askren: We have seen a lot of the vehicles go up in price for the agreed value for their vehicle. Let’s say that last year their car was $60,000. Now, it’s $62,000. We don’t see a huge increase like we do on the dwellings for the homes, but we do see it. How the insurance carriers are protecting themselves? As agents, we’re being the eyes and ears for the insurance carriers that are talking to the clients a little bit differently. The focus is to educate them to increase their deductibles, cut the claims down, and how to protect their cars and their homes so those claims don’t happen to keep their premiums in other areas down. I think agents have to be more proactive to help the insurance carriers.

[00:17:44] Dean Barber: How competitive is that market, Sarah? I mean, you can’t turn on any sporting event without seeing multiple commercials from the little GEICO dude running around to the Liberty Mutual commercial. It’s almost like these people are spending millions of dollars on advertising. Is the market really that competitive? Can you really save 10% or 15% or however the GEICO deal goes? Is that stuff real? Or is this just a marketing gimmick?

[00:18:21] Sarah Askren: It’s probably real to some extent. Your GEICO agent is not going to call because there is no agent. And with Patrick Mahomes, with State Farm, stuff like that, it is very competitive. When it comes down to it, it still is probably the agent or the agency and helping the client understand what your insurance is, how it works for you, and what can we do for you? And staying in front of the client.

[00:18:48] Dean Barber: You see people get with a captive agency like State Farm or like American Family or something like that. They will stay with that same agent and agency for 10, 15, 20 years. What are they missing that the rest of the industry has? Or is it really true that everybody is going to get the Mahomes discount and it’s going to be the best for everybody?

[00:19:23] Sarah Askren: I do love those commercials. What are they missing out? Probably competitive rates at some point, but to State Farm, American Family and those on the back, I don’t sell for them. But they do keep their clients pretty loyal and sometimes have markets other insurance carriers can’t sell in or want to sell in. They’re probably missing out on the options to have their policies looked at every year. I’m a big fan of trying to keep a client with one company and trying my best not to move them, if possible, because I believe in loyalty to an insurance carrier. I have a lot of friends who sell State Farm and American Family, and they do well.

[00:20:16] Dean Barber: I have friends and acquaintances that work for a lot of the different insurance companies. It’s interesting because they all think that theirs is the best. And we know that there’s not one company that’s going to be the best for everybody. So, if you’re working with a captive agent and want to shop, you need to go out and do it. You need to find independent agents like Sarah at The Miller Group and shop that against other carriers. But at what point does it make sense to do that on a periodic basis where you’re going to not necessarily question your captive agent, but you’re just doing your due diligence?

[00:20:59] Sarah Askren: I think everybody gets caught up and thinks that they can get lower premiums somewhere else. Well, the company you’re thinking about jumping to has to find a way to make money, too. So, they will eventually increase premiums as well. That’s when you start to think about jumping back. I think it’s very wise on a client’s annual review to ask the questions and do their own due diligence.

[00:21:31] Dean Barber: You do your reviews every year or every other year, correct? How often are you reviewing your clients’ policies?

[00:21:39] Sarah Askren: We do them every year. The clients have a choice if they want to have in person or on the phone. We will re-market them if we feel their rates went up. There’s really no rhyme or reason why they went up like this year. With 2021 rates in Missouri, just for example, there were two rate increases with two different carriers I use. Clients were not happy. So, we go re-market them to another carrier. What they don’t understand is that other carrier’s rates are high already.

So, we keep them where they’re at. We just possibly change their deductible or make sure everything is in line. However, insurers also understand things are happening right now. Everything isn’t really normal right now. But when someone’s rates go up 30%, and they’ve had no claims and nothing different in their household, they want to move. So, we try to keep them where they’re at, or sometimes they go elsewhere.

[00:22:40] Dean Barber: Yeah. It’s interesting. In the property and casualty insurance world, people never go out and buy a homeowner’s policy or an honorable bill policy and want to file a claim. But I also know that some carriers have a better history of paying claims than other carriers. Some carriers may want to give a little bit of a fight or make you jump through some extra hoops. So, what do you do in that scenario? Do you know that about the carriers? And do you choose not to use the carriers that are more finicky on the backend of that thing when a claim does need to be filed? Or is that just the nature of the industry itself?

[00:23:23] Sarah Askren: I wouldn’t say it’s necessarily the nature and the industry. I think that’s a perception on the industry. There are carriers who we consider to be high net worth carriers. They tend to pay claims a little quicker without the details and out of the pettiness of turning receipts in and so forth. They do a lot of the back-end work with researching how much stuff costs so the clients don’t have to do it.

There’s usually a little premium. It costs a little bit more to use those companies. We have insurance carriers we use. You wouldn’t think they’d pay claims right away, but they’re the best-paying claims. For example, I sell Progressive, and their claim system is pretty good. We use progressive for a lot of motorcycles and autos for certain individuals.

[00:24:16] Dean Barber: I had a scenario happen to me a few years back when there was a hail storm in the Kansas City area. We get those occasionally. I didn’t think a whole lot about it until people in the neighborhood right next to me started replacing their roofs. That made me wonder if we actually got any roof damage during that hailstorm, so we had somebody come out to do an inspection of the roof. Sure enough, we had extensive hail damage. So, we filed a claim for a roof replacement. For the date of the claim on the application, we put the date of the claim as of the date that we filed it.

I think that was wrong because they said there were no incidents in my area during that time. So, my claim was denied. It took us over a year to get the underwriters and insurance company to allow us to refile that claim based on the date of the actual occurrence. It was close to a year before we got the roof replaced and it felt like we just kept running around all over the place.

[00:25:39] Sarah Askren: You didn’t have me as an agent.

[00:25:40] Dean Barber: I did not. But it’s like, come on, obviously, we wrote the wrong date down. Here’s the date of the incident, right? Let’s just get the thing fixed, but it wasn’t that simple.

[00:25:56] Sarah Askren: Yeah, it is the date of the occurrence.

[00:25:59] Dean Barber: We put the date that we filed the claim on it on the form. And our agent, obviously, at that time, didn’t say, “Oh no. You don’t put that date there. You need to put the other date there.”

[00:26:12] Sarah Askren: It should have been a quick fix.

[00:26:13] Dean Barber: Yeah, it should have been. It wasn’t. The bottom line is that what people like Sarah do with The Miller Group to help our clients protect themselves is critical. I’d love for everybody to know that you need to be getting your insurances reviewed. It doesn’t matter if it’s your health insurance, your Medicare supplements, your property and casualty insurance, your life insurance, or your long-term care.

All those things deserve a review. Review them at least every other year at a minimum. They deserve a review just as much as your investments, tax situation, and estate plan. It’s all part of the comprehensive financial plan, but I think people forget about it. They just think if they have a policy that they’re good and don’t want to sit down and talk about insurance for like two hours. They might even say they’d rather go to the dentist, but why should they take that time to review insurance?

[00:27:16] Sarah Askren: I would rather talk insurance and not dentists.

[00:27:19] Dean Barber: I would too. I hate the dentist, but don’t tell my dentist I said that. Sarah, is there anything else that you’d like to share about the importance of the proper property and casualty insurance?

[00:27:33] Sarah Askren: First, I would encourage everybody to talk to your insurance agent and ask questions. No question is a stupid question. Make sure you’re taken care of. Especially with COVID happening, look into travel insurance if you do travel. It doesn’t cost a lot. We are helping clients with that. Also, understand that if you go across seas, a lot of our insurance, like your HMO and PPO, doesn’t cover places over there. If you have to make an emergency flight back, all that stuff can get paid for if you’re properly insured under travel insurance.

There are a couple of other things I want to mention about the umbrella policy. Ask your agent about umbrella policies, even if it’s a $1 million policy. That’s to protect yourself as a whole. It’s inexpensive. Then, one more thing about claims. The worst claims I have had come through since I’ve been at The Miller Group have been water claims. That’s been especially true because of COVID and supply and demand. Fixing a water claim is horrific. It’s not that expensive, but a water shut-off valve on your home is well worth it. That’s just a tidbit. Talk to your plumber and have it installed.

[00:28:56] Dean Barber: Water shut-off valve, pump, same thing?

[00:29:00] Sarah Askren: No.

[00:29:01] Dean Barber: No, but that helped you?

[00:29:03] Sarah Askren: Yeah, it’s helped them, but it’s just protection. I guess this is why I also said yes to being on the podcast. I have a passion for insurance, but I also care about people. Insurance is there to protect everybody in catastrophe. When you have a complete loss, insurance will take care of you and your stuff. It protects your home and car the way you should do. I get my heating and cooling vents checked all the time just so everything’s burning right. I do the pump water shut-off valve, but also maybe have a plumber come look once a year or every other year. The little things help.

[00:29:54] Dean Barber: Great. I appreciate you taking a few minutes to join us on The Guided Retirement Show™. Many people might be thinking, what in the world does insurance have to do with retirement? But it’s part of your risk management and it needs to be discussed. You need to feel confident that you can discuss it in a way where you don’t feel like somebody is selling you insurance. That, to me, is the key. You need to look at your insurance agent as a trusted advisor. That person should be someone that knows what’s going on, really cares, and is always doing the right thing. Sarah, that’s you. That’s what you do there in The Miller Group. I appreciate you joining us on The Guided Retirement Show™.

[00:30:32] Sarah Askren: Thank you.

[CLOSING]

[00:30:32] Dean Barber: Thanks so much for joining us on The Guided Retirement Show™ for my conversation on property and casualty insurance with Sarah Askren. Don’t forget to subscribe and share with your friends. If you’re watching us on YouTube, feel free to engage in a conversation regarding our discussions. Thanks again for listening to The Guided Retirement Show™.

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