What Happens If You Kill Bill?

This is the story of how Paula and Stan doubled their insurance coverage for free.

As a wealth strategist I develop a coordinated wealth plan for my clients that are very holistic in nature.   And although I don't sell auto insurance, I always review my clients' coverage.   And the story of Paula and Stan is very common.     In the last month I had 3 couples in this very situation. 

Problem 1:   Low Liability Coverage   In reviewing Paula and Stan's policy the first problem I noticed was that they only had $1Million dollars of liability coverage.   Now image that they get into a car accident and Kill Bill.   Well Bill's wife now has a claim against Paula and Stan's insurance policy.   How much is she entitled to?   Well, as it turns out, the value of Bill's life does have a number attached to it.   It's called the Human Economic Value.   If Bill is 45, earns $100,000 a year, and is expected to work another 20 years, Bill's Human Economic Value is 20 years x $100,000 or $2 Million dollars.   And that's exactly what Bill's wife is entitled to.

With only $1Million dollars of insurance, where does the remaining money come from?   Well it comes from any other assets or income that Paula and Stan may have that are not creditor protected.   The most obvious one would be their home.

Problem 2:   Zero or Low Deductible  The second problem I noticed with the coverage was that they had a $0 deductible.   This means that if they get into an accident the amount they would have to pay against the claim is $0.   When I asked them however if they got into an accident where the repair was $1,000 would they put it through their insurance company they both gave me a confident "NO!"   Then why are they paying for a feature (zero deductible) that they have no intention of ever using.

Problem 3:   Collision coverage on older vehicle   The third problem I noticed is they had collision insurance on their vehicle which was a 2008 minivan.     The vehicle was worth less than $7,000.     I am not sure if it needed a body repair of $3,000 they would even do it.   And it wouldn't take much for a car accident to cause $7,000 of auto body repair, in which case the insurance company wouldn't repair it anyway ... they'd write it off.

So what was the end result?   Paula contacted her insurance company the very next day.   She was able to increase her liability coverage to $2 Million, she opted to increase her deductible to $1,000, and she removed the collision coverage on her older vehicle.

And what was the cost?  Well she actually had to pay $10 less a year as a result.   

Believe me, the insurance company is not calling their clients to double their risk exposure and lower their fees.

This is just an example of how I help clients every day with a holistic approach to a coordinated protection and wealth plan.

(Apologies to my husband Bill)