Q&A with Eli Zimmer, Partner at Daigle & Travers, on personal property insurance.

Every six months when the insurance premium bill comes due, you groan as you pay it. But when life's unexpected occurs - the storm that drops a tree through your roof, or the day you don't hit the breaks in time and rear end the car in front of you - personal property insurance let's you breathe a sigh of relief. Today's Family Financial Savvy covers the second part of my interview with Eli Zimmer of Daigle & Travers talking about Property and Casualty Insurance. Be sure to check out part one on Life Insurance for Parents and our previous discussion of Disability Insurance here.

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What is Personal Property Insurance?

Insurance is one of the most common topics my followers request I cover for Family Financial Savvy. It is a complex financial product, with nuances, differences in coverage and terms across different niches. Insurance companies tend to break their business into two lines - Life Insurance (which we covered in our first Q&A with Eli) and Property Casualty Insurance. Health insurance is a wholly different product, typically provided by altogether different insurance companies, to be addressed at another date.

Property and Casualty insurance broadly are types of insurance coverage that protects your personal property, like your home or car. It also includes liability coverage to help protect you in the event you are deemed legally responsible for an accident harming another person or their personal property.

Personal Property Insurance - 6 Things All Savvy Moms Should Know

If you have a mortgage on your home and a license to drive your car, you are likely legally required to have home insurance and at a minimum, liability insurance for your car. But how many of you actually fully understand your policies, coverage limitations and how to get the best coverage for your personal property insurance premiums?

I recently sat down with my friend, Eli Zimmer, a Partner at Daigle & Travers, one of the leading independent insurance agencies in the state, to learn more about personal property insurance and help all of you answer those questions and more.

The entirety of my interview with Eli Zimmer of Daigle & Travers appears below. It has been edited for brevity and clarity.

What types of personal property insurance should all families carry?

All families should carry liability insurance. That generally comes as a part of your homeowner’s, renters, or condo owner’s insurance policies.  In addition to the liability coverage, your policy will also provide coverage for your personal property and valuables.

Additionally, if you own vehicles you should seriously consider purchasing an umbrella liability policy in addition to a traditional auto policy.  Finally, if you have domestic help, such as an au pair or nanny, working over 26 hours a week on average, you also must purchase Workers Compensation insurance.

What is an umbrella policy? How do you know if you need one?

An umbrella policy is extra liability coverage in the form of an endorsement or separate policy that provides necessary asset protection required due to large claims or lawsuits. The umbrella policy coverage begins where your homeowner's or auto policy coverage ends. The cost of an umbrella policy for a home and two cars is roughly $200 for $1 million of coverage.  These coverage limits can be increased in increments of $1 million.  Anyone who owns a home, has significant assets, or large amounts of future wages at risk should have an umbrella policy of some level.

To determine if you need one, you must first have an idea of what is at risk.  Add together the equity in your home, the value of your bank accounts, investments, and personal property, and then quantify your future wages by multiplying your current salary times the number of years until you turn 65. Add all of these numbers together, and you might be surprised to find out just how big a number it is. That is what is truly at risk if you are held at fault in a major car accident, or on your personal property, a dog bite, a slip and fall, or even fraudulent claims.  They all cost money to defend.

A 40-year- old making $100,000 per year would require $2.5 million of coverage before even adding in other current assets.  When it is all said and done, a limit of between $3 million to $5 million may be appropriate for many families.

How often should you re-evaluate your personal property insurance coverage?

Your agent should reassess your coverage on an ongoing basis, but an annual review is typical.  Proper assessment of your coverage should be done with an independent agent that works with multiple carriers to place your business.  Working with an agent with a single market could lead to the unknowing purchase of a policy void of critical coverage.

An agent with proper market knowledge and multiple markets will know when the time comes to move your insurance and when it’s important to stay put.

How do you choose between lower premiums or lower deductibles?

This depends on the policy and some basic personal questions.

• First and foremost, can you afford the deductible hit to your budget?
• Second, what is your personal feeling with regards to making claims?
• Lastly, there comes a point where the increase in deductible and lowering of premium reaches an optional level before it drops off in savings

Only you can answer what you can afford deductible-wise. On claims, insurance was always meant to be for catastrophic purposes, and it’s our opinion that you should treat it that way.  Your deductible should reflect this opinion.

A few facts and rules of thumb... We usually recommend that if the savings from a homeowner’s deductible increase over 3 years is greater than the difference in deductible, then go with the larger deductible.  (ex.  $1,000 deductible vs $2,500 deductible, for a difference of $1,500.  If the premium savings moving from $1,000 to $2,500 is $600, then over three years that is $1,800 vs. $1,500 difference in deductible.  Therefore, choose the higher deductible.) Keep in mind, on a homeowner’s policy, the average homeowner has a claim once every seven years.

On the auto side, the rule of thumb is simple: never file an auto claim if after the deductible is applied you will receive less than $1,000.  That said, your collision coverage is the second highest driver of premium for your auto policy, so your deductible, more often than not, should be higher -  we recommend $1,000.  Your comprehensive deductible on the other hand carries far less premium burden, so $500 is likely a better option.

What is the best way to evaluate different personal property insurance policies?  What key items should be compared for auto and home coverage?

Since it is unlikely that the average person completely understands insurance or is aware of current market conditions, you will need the assistance of a trusted independent agent.  There are tremendous differences in the product offerings that carriers offer.  Yes, there are some “basics” that appear similar, but there can still be vast differences.

Auto insurance, thanks to volume-driven, mass-market insurance carriers, has morphed into a commoditized product.  The problem is, in order to be a commodity, the products including both limits AND the coverage form must be virtually identical. Unfortunately, they are not.

The average person will look at the basic coverage limits on an auto policy and then price.  What is overlooked are the numerous coverage holes riddled throughout the policy that cut out that insurer’s requirement to pay on a claim.  They can be obscure things like language that will deny a theft claim if you accidentally leave your keys in the car to larger issues such as failing to list your car for “business use,” and using it as such.  Discount insurers can deny claims because of this simple classification issue.  An agent is aware of these pitfalls, can watch out for you, and best help you weigh your options.

What benefit do families get from working with an independent insurance agent?

Proper assessment of your coverage can only be done with an independent agent who has multiple carrier options with which to place your business. An agent with proper market knowledge and multiple markets will know when the time comes to move your insurance and when it’s important to stay put.

Working with a agent is free of additional fees, and generally comes with additional claims and billing services as well.  You get to work with the same people regularly,  have an actual relationship and a trusted adviser to discuss your options.

When you get in a tough spot due to claims activity, brokers have the ability to make lateral moves with place your coverage or if necessary access a secondary market with hundreds of additional options.  There is a huge difference between going it alone and having an agent there the whole step of the way.

You won’t see the value of an independent agent clearly until you have a claim.  Your agent will assist you through the entire process: help you make your case for a large claim payout, help arrange for damage repair.  If you have a claim and go to a captive agent that sells a single product, you’ll get a phone number to call to file your own claim.  Call a direct writer to discuss your options, and you’ll have a filed and documented claim that could have adverse impact on your future insurability…just for asking a question.  There is immense value to working with a broker at no additional cost.

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I owe  a very big thank you to Eli for answering all my readers’ personal property insurance questions and life insurance questions. If you have more specific insurance questions, feel free to email me, leave them in the comments below, or join my private Facebook group - Family Finance Moms. For more specific coverage and policy questions, you should consult your insurance broker. 

Learn More About Eli Zimmer and Daigle & Travers

Eli Zimmer is a partner at Daigle & Travers Insurance in Darien, CT. Eli joined the Daigle team in 2006. After growing up in Western Massachusetts, he went onto Skidmore College. Post graduation, he worked for Head Sporting Goods and Paychex before moving into insurance. While in insurance, he was awarded top 40 under 40 for Fairfield County, and for the last 5 years, he has been award one of Connecticut Magazine’s top agents. Eli became a partner of Daigle & Travers in 2012.

Daigle & Travers represents over 20 insurance carriers in more than 20 states, with the focus on insurance for both individuals and businesses. Due to our relationships with insurance carriers we, are able to provide our clients with the best coverage while remaining competitive in the market place. Learn more at daigletravers.com, or follow D&T on Facebook.

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Be sure to catch the first part of my insurance interview with Eli where we discuss term life insurance for parents, the most affordable insurance coverage your premiums can buy. You can find all of these posts and more on my Family Financial Savvy board on Pinterest.

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