The Herald Bulletin

August 30, 2013

'Big Joe' Clark: Your current insurance doesn't cover as much as you think


The Herald Bulletin

---- — When you think of insurance the first things to pop in your head are probably life, health, homeowners and auto insurance.

It may surprise you to hear that just because you have all four of these major forms of insurance that doesn’t mean there aren't gaps in your coverage. Things like inheritances and commodities can have a large impact on the amount of coverage you may need.

Many homeowners’ policies have a coverage limit for things like jewelry, watches, and stamp collections that are lower than they may expect, and that’s per claim, not per item. So if your home was broken into and a jewelry box was taken or your watch that happened to be a family heirloom was stolen, most people would be stuck once they hit that coverage limit, which only might cover a small portion of what needs to be replaced.

Just like sitting down with a CPA or financial planner to review each year’s tax filings or investments, it’s often a good idea to re-address insurance needs to make sure the coverage you have is appropriate. If you recently inherited your mother’s fine silver or art collection, your insurance needs have now changed.

There are certain types of riders and endorsements that a good insurance agent would be able to go into detail about that can provide the necessary enhancements to your currently policy.

Commodity prices can affect your coverage as well. There are stories daily that discuss the price change in an ounce of gold, but did you know the price of diamonds also fluctuate?

For example, according to a Wall Street Journal piece by Julie Steinberg citing a study done by Luc Renneboog and Christophe Spaenjers, diamonds have produced annualized real returns of 6.4% between 1999 and 2010, compared to global stocks earning an annualized -0.1% for the same time period.

If you have an insurance policy on a piece of jewelry, the appraised value from possibly 10+ years ago might drastically undervalue the stone that’s currently insured. Few wives would like to have their engagement ring lost or stolen and then find out the insurance payout only covers a replacement stone half the original diamond’s size.

Insurance is necessary for many aspects of our lives, and it’s one of those things we don’t often appreciate until we need it. While it’s a good idea to purchase insurance to cover the risks you don’t or can’t self-insure for, it’s important to review your current coverage with a qualified agent or financial advisor to insure what you think you’re covered for is still true today.

Joseph “Big Joe” Clark, whose column is published Saturdays, is a certified financial planner. He can be reached at bigjoe@yourlifeafterwork.com or 640-1524.