Get Financially Fit!
Archive for November, 2006
Steve Wozniak: Why I Carry $20,000 With Me At All Times
Nov 7th
“I’ve got about $20,000 on me at the moment, which is about the usual. Cash has always appealed to me more as a means of payment than card”. Great interview with Woz discussing his feelings towards finances.
Personal Liability Umbrella Policies – Part 2
Nov 4th
The following is part 2 of a newsletter I received from Eric Heckman, CFP, ChFC.
What’s Covered?
A typical personal liability umbrella policy provides the following protection, up to the coverage limits specified in the policy:
- Protection for claims of bodily injuries or property damage caused by you, members of your household, or hazards on your property, for which you are found legally liable
- Personal liability coverage for incidents that occur on or off your property
- Additional protection above your basic auto policy for auto-related liabilities
- Protection against non-business-related personal injury claims, such as slander, libel, wrongful eviction, and false arrest
- Legal defense costs for a covered loss, including lawyers’ fees and associated court costs
What’s Not Covered?
Personal liability umbrella insurance typically provides extremely broad coverage. Furthermore, if something is not expressly excluded from coverage, it is covered. The following exclusions are common:
- Intentional damage caused by you or a member of your family or household
- Damages arising out of business or professional pursuits
- Liability that you accept under the terms of a contract or agreement
- Liability related to the ownership, maintenance, and use of aircraft, non-traditional watercraft (e.g., jet skis, air boats), and most recreational vehicles
- Damage to property owned, used, or maintained by you (the insured)
- Damage covered under a workers’ compensation policy
- Liability arising as a result of war or insurrection
How Big of an Umbrella?
Determining how much liability coverage you need is not an exact science. You might think that you need only enough liability insurance to protect your assets, but a large judgment against you could easily wipe out your assets and put your future earnings in jeopardy.
Coverage limits vary, but a typical policy will provide liability coverage worth $1 – $10 million. Of course, as your coverage limit increases, the premium will also increase. Your licensed property and casualty insurance agent can help you determine how much coverage you need.
Where Can I Buy?
Almost any insurer who writes auto and home insurance policies will also offer liability umbrella policies. You many even be eligible for a multi-policy discount if you purchase a PLUP from your current property and casualty insurer.
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Building a $10 Million Company by Accident!
Nov 3rd
I just read “Instant Company, Croc Edition” by Diane Anderson. Talk about getting rich in a niche. The Schmelzer’s were not lucky; they deserve every bit of credit for recognizing and monetizing an opportunity. The market rewarded them and placed a premium on their product (born out of a simple idea). This article should also serve as an inspiration for those of us who have been thinking about starting a business but never acted on it.
So, what’s stopping you?
Personal Liability Umbrella Policies – Part 1
Nov 2nd
I received the following newsletter from Eric Heckman, CFP, ChFC.
When your local weather forecaster tells you that it’s going to rain, you reach for your umbrella. So why not purchase an umbrella that can protect you in stormy financial weather? Personal liability umbrella policies (PLUPs) can do just that. By providing liability protection above and beyond the basic coverage that homeowners/renters and auto insurance policies offer, a PLUP can protect you against the catastrophic losses that can occur if you are sued.
Although a PLUP can be purchased as a separate policy, your insurer requires that you have basic liability coverage (i.e., homeowners/renters insurance, auto insurance, or both) before you can purchase a liability umbrella policy. It is often referred to as excess coverage. If you are found to be legally responsible for injuring someone or damaging someone’s property, the umbrella policy will either pay for the part of the claim in excess of the limits of your basic liability policy or pay for certain losses that are not covered.
Why now? It’s not even raining
These days, it’s not unusual to hear of $2 million, $10 million, and even larger court judgments against individuals. If someone is injured in your home, or if you cause a serious auto accident, you could have to pay such a judgment. If you don’t have a PLUP at the time of the accident, anything above the limits of your homeowners/renters or auto insurance policy will have to come out of your pocket.
Here’s an example of how a PLUP works to protect you. Say you have an auto insurance policy with a liability limit of $100,000 per accident. You also have a $1 million umbrella liability policy. You’re later found responsible for a serious automobile accident, and the court finds you liable for $700K in damages. In this case, your auto insurance would pay the first $100K of the judgment, which would satisfy the deductible under your umbrella policy. Your umbrella policy would then cover the portion of the judgment not covered by your auto insurance ($600K).
Certain types of liability claims (e.g., libel and slander) are not covered under basic homeowners, auto, or other types of insurance policies. An endorsement can be added to these policies to provide some protection, or you can purchase a PLUP which does cover these claims.