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July 15th, 2013

By Scott Sarber, CFP®

Summer lightning storms, fireworks, and out of control backyard barbeques are all things that could potentially lead to a quick disaster.  With three recent fires in our area (Clodfelter, Finley, and Badger Mountain) we had some clients with close calls.  Since we had some clients with fire literally in their backyard, we thought it would be a good idea to address an asset protection topic – homeowners insurance and personal liability insurance.


When you receive your annual renewal notice from the insurance company there are three things you should immediately do:


1) Open it – most people open it, identify that it is not a bill, and either file it, or shred it, but you should also…


2) Review it – Do not throw it away as soon as you see it is not a bill!  Your homeowners policy should show multiple areas of coverage: Dwelling coverage –represents the cost of not only rebuilding your house, but also tearing it down and hauling it away


a. Other structures – cost of rebuilding additional structures like shops, tool sheds, pool sheds, etc…


b. Contents – cost to replace the contents of your house including furniture, electronics, beds, clothes, art, etc…


c. Loss of use – cost of a hotel stay while your house is being rebuilt.


d. Liability – protection against injury on your property.


3) Contact your insurance professional – discuss the coverage limits with them to make sure your assets are adequately protected.


According to Barbara Weissenfluh, an insurance agent at Conover insurance, one of the most overlooked areas of the homeowners insurance policy is updating the dwelling coverage after a home improvement project.  The coverage likely has Extended Dwelling Protection, which generally provides a 25% increase to the value of replacing the home.  For instance, if the cost of building materials was much higher than normal due to some unforeseen circumstance that would raise the cost of replacing the house, most policies have up to 25% additional cost built in to the insurance.  However, if the cabinets and countertops in the house have been replaced, or the carpet with hardwood floors, the value of the replacement materials in your house have likely increased, and it could void out the extended dwelling protection.   So if the basement is being finished or the kitchen and bathroom are being remodeled, it is a good idea to contact your insurance agent to see if the policy needs to be adjusted.


Also, it is a good idea to have photos of household items.  If everything is lost in a fire or if the house is burglarized, it is the homeowner’s responsibility to report what was lost.  Most people could not recall all of the things that were lost, especially after a fire or burglary.  It is suggested to write down serial numbers and models of electronics, which not only increases the odds of stolen property being returned, but also helps insurance companies in replacing lost items with a current version instead of the least expensive.  At the very least, take photos of your belongings. Open up the cabinets, closets and drawers and take some photos.  Put the photos in the fireproof safe, or better yet a safe deposit box.


Another important asset protection topic is personal liability insurance. This is coverage above and beyond homeowners insurance and auto policies. In our litigious society, lawsuits can come from any direction.  Most of our clients should have at least $1 – 2 million of personal liability coverage.  If your net worth is significantly higher, then insurance coverage should increase accordingly.   Think about what might happen if a crash occurs on the highway while transporting a few baseball or soccer players to an out of town tournament. A $300,000 liability limit on an auto policy will probably not cover the potential injuries and lawsuits that may follow.  If you are perceived to be wealthy because of your profession, a big house, or a new Mercedes, you are more likely to be a target of lawsuits.


There are three things we recommend to protect your assets.  1) Review your homeowners insurance policy to make sure you are adequately covered, 2) make an inventory of your household items, and 3) check with your insurance person to make any changes if necessary.