- Insurance is an automatic requirement for financial institutions and regulators, but you must go through the underwriting process to obtain it.
- There is property insurance that protects our property from unforeseen events, and casualty insurance that protects us from claims brought upon us by others.
- Choose an umbrella policy to gain overall coverage to protect your accumulated assets.
Our bodies have an automatic nervous system and it takes care of our heart, regulates our breathing, body temperature, blood pressure, and many other functions that we don’t consciously think about. It works in the background as we go about our daily lives.
Likewise, in the property and casualty insurance area, we have this kind of automatic requirement by financial institutions because they make loans to us for cars and homes, and by regulators to protect others in case of a loss.
It’s automatic, however, it still must go through underwriting. What does this mean? It means you get “underwritten” by an insurance company, which is a process the company puts you through that includes things like your credit history, past loans or claims, and several other areas that can influence your insurance. It could mean you will have a higher deductible or even be denied coverage if you have past bad claims experiences.
Let’s assume you get the coverage. Millions and millions of dollars of premiums are collected by insurance companies and the law of large numbers says they, with some level of predictability, can tell if they’re going to be able to cover all those claims, plus make a little profit.
First, we have the property side of insurance which covers our home, auto, personal property, boats, and other items. Coverage from what? From things like fire, theft, inclement weather damage, and auto vehicle accidents. Then we have the casualty side of insurance which protects us from claims from others who have loss incurred by a particular event.
Remember however, that the claims go to a certain level under that property and casualty policy. Let’s say it’s a $250,000 level on your auto policy, and you injure somebody in a vehicle accident. They may sue you for a million dollars. You’d have to come up with the other $750,000 from the assets you’ve accumulated. That’s a bad deal!
Look in to getting a personal umbrella liability policy if you’ve got assets you’ve accumulated, to protect your assets against those kinds of lawsuits. This type of policy will cover your auto, home, boat, and so forth to make sure you don’t take this loss personally. Lay it on the insurance company to take care of all your basic property and casualty, and any higher level casualty that might take place.
It’s about protecting your wealth so that you can continue to build it successfully over time!
Until next time, enjoy. Gary