The S&P 500 set another all-time high last week, as earnings reports from publicly traded companies were mostly positive. The Federal Reserve Bank held interest rates steady as expected. With expected Initial Public Offerings of Open AI, Anthropic, and SpaceX coming this year, the company that sets the S&P 500 is considering rule changes to allow those companies, and others, earlier inclusion on the S&P 500.
If you want to grow and preserve wealth, your insurance coverage plays an important role. When you are starting out, you may have a lower deductible for your auto insurance. That’s the amount you have to pay before your insurance kicks in. But as your emergency savings grows, you can raise your deductible, essentially self-insuring for that amount. Higher deductibles generally result in lower premiums.
But having the right coverage is the most important part. For auto insurance, we generally recommend $250,000 per person and $500,000 per accident of liability coverage, with uninsured/underinsured coverage to match. The liability coverage protects you if you cause an accident. The uninsured/underinsured coverage protects you against reckless drivers who don’t have enough insurance.
Your home or renter’s liability insurance should increase as your income and net worth increase. A report from the American Transportation Research Institute showed that truck accident cases resulting in jury awards over $1 million increased by over 1000% between 2010 and 2018. If someone is injured on your property, or if your pet bites someone, your child punches someone, or you’re volunteering somewhere and you are accused of something, your savings could be at risk. Your wages could be garnished in a settlement.
How do you protect yourself from lawsuits if jury awards are increasing in size?
Generally, your retirement assets are protected. Home equity protection in a bankruptcy or judgement varies by state. In Maryland, just over $25,000 is protected, but in Florida all of your equity is protected. Any property titled Joint Tenants by the Entirety will be protected, unless both spouses are liable. This is an easy way to add additional protection to both real estate and, in many states, investments. Check with your advisor to confirm they have titled your accounts correctly.
The final way to protect yourself is an umbrella policy. This is a liability insurance policy that sits – like an umbrella – over your home, auto, boat, and RV insurance. They are sold in $1 million increments. It is important to confirm everything is listed on the umbrella policy. We often find second homes or boats are not covered, leaving a liability gap.
The other exposure with an umbrella policy is the underlying limits. For example, your umbrella policy may require $500,000 in home liability coverage. But your policy only has $300,000 of coverage. If there was a serious accident, your homeowner’s insurance would pay $300,000. The next $200,000 would be on you, to reach that $500,000 minimum for your umbrella to kick in.
In today’s litigious world, titling assets correctly and having adequate insurance coverage are two key parts to preserving everything you’ve worked hard to build.
Your action item this week is to clean your grill, and make certain that it is 10’ from your house for maximum safety.
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CovingtonAlsina is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.