Managing risk: Don’t be caught insurance poor

  • Tuesday, September 2, 2008 1:29pm

I am the type of person who does not have a first thought to sue someone just because I could possibly win some money. I like to think the vast majority of you think the same way. The problem is that it only takes one major suit to ruin your day — or longer.

In this column we have addressed many topics. They all have a facet of financial planning and wealth management as a common denominator. This month, we will focus on keeping and protecting your resources through proper risk management. It is, after all, the base of the planning pyramid. Without good risk management all other assets and resources can be in jeopardy due to a simple accident.

I’ll discuss several areas in “risk management,” namely risk avoidance, risk planning and risk transfer.

Risk avoidance can be as simple as cleaning up the pile of banana peels that are on your doorstep or not heading down the off-limits area while skiing. Mostly, it’s common sense.

Risk planning covers many areas and includes having enough resources set aside to pay deductibles.

Risk transfer is the process of hiring insurance companies to take on those risks you cannot adequately plan for or avoid in an effective manner. We have all kinds of insurance for this, including auto, homeowner, professional liability, personal liability and commercial. Collectively, we call this P&C insurance (property and casualty). It is a very important part of the planning process, but it is often overlooked or taken for granted.

To assist us this month, I’ve enlisted the help of Scott Shinstrom, vice president and partner of Shinstrom Norman Insurance agency in Kirkland. He has been in the P&C business most of his adult life along with his partners and is the third generation of a business started by his grandfather in 1912. Customer service and your agent’s knowledge of your particular needs are very important, and Shinstrom is one of the best here.

He says that the most common liability claim comes from auto accidents. By definition, this is an unintended occurrence that can have dramatic ramifications. If your liability is not up to the task, you could be in serious trouble.

“Consider incorporating your umbrella liability coverage along with your homeowner’s and auto liability,” he says, “it’s a great buy for the money.”

Shinstrom adds that you also buy a legal defense fund that is usually unknown to your opponents in a suit.

Another area that may get overlooked is that seasonal (unattended) residence. It is possible to have a hazard occur without your knowledge, have someone get hurt as a result and you are on the hook for the liability.

You don’t want to end up insurance poor, and this is where having an agent who knows your needs comes in.

The online and telephone insurance companies may have an advantage on price some of the time but not always. They cannot be expected to get to know you like a local representative should be able to know you. Also, the local agent should be well versed in local and state regulations and other considerations specific to insurance in your area. The goal here is to have adequate coverage without giving up your first born.

If you’ve been reading my column for a while, you know I believe in proactive attention to planning considerations. This includes these insurance areas as well. Shinstrom suggests having your “agent review coverage every year or two, depending on the activity of the family.”

He adds that “any inquiry or change should prompt a review to ensure all plans are well coordinated.” He offers such a consultation and is available at 425-827-6200.

In a nutshell, have a great relationship with your P&C agent and include his or her ideas in your team approach to your planning.

Dale Terwedo, certified as a CFP, ChFC and CLU, is principal of Terwedo Financial Services LLC, an independent financial services firm in Edmonds. Terwedo offers securities and investment advice through FSC Securities Corp., Atlanta, Ga. For more information, send e-mail to or call 425-776-0446.

The views expressed are not necessarily the opinion of FSC Securities Corp. and should not be construed as an offer to buy or sell any securities mentioned herein. Investing is subject to risks including loss of principal invested. No strategy can assure a profit nor protect against loss.

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