This article originally appeared in Physicians Pracrtice as a two part series, I provide both below. Asset Protection is not just about lawsuits. It’s about a rational understndinig of all risks and exposures and being prepared for them, it’s a state of mind that provides the confidence of being prepared for the unexpected. Sometimes those unexpected events are financial or legal, sometimes they are much broader and more basic. As always, timing is key – you can’t prep for something that’s already happened . – Ike Devji
Recent events like the seemingly impossible East Coast earthquake and the hurricane season have been good reminders that we need to perform financial check-ups periodically on a variety of issues. In the past we’ve discussed a checklist of essential legal and financial planning, but even when that planning exists a periodic review is essential to make sure that it is adequate, known by your family, and complete.
Your Estate Plan, Mortgages, and Titles to Property/Insurance Documents: Where Are They?
Most people overlook the importance of being able to document the important business and legal transactions that are the center of their wealth and security. Amazingly few of us take proper care of those documents or have a place where they are safely and predictably stored. Yes, those paper banker’s boxes from the office supply store are great until a flood, fire or other unexpected surprise takes them out, then what? When Costco and other big retailers have fire- and water-proof safes that will hold your documents for as little as $100 — and larger gun safes capable of holding documents, jewelry, laptops and many other valuables for as little as $500 — delivered to your door, there is no longer an excuse to not have some way to secure these items.
Who ELSE Knows Where These Items Are?
In many families, certain issues are often handled by one party or the other, even if these issues are joint decisions. We often see an unfortunate gap in the knowledge of the details, however. This adds stress, expense, and delay during difficult times. Make sure your spouse or (or other responsible parties) knows where the documents are and how to reach them. If you have team members, like a financial planner, lawyer, insurance agent, and CPA , make sure your family knows who they are and how to reach them.
Is Your Insurance Coverage Adequate and Complete for Your Current Level of Success?
As hard as it is to believe, there are still people with substantial home equity. Most of those people have been in their home a decade or longer or committed a large amount of cash to the purchase of their home, making it one of their most valuable assets. A review of the homeowner’s policies of many of these people shows some frightening gaps in the coverage in several areas.
First, we often see that the PERSONAL PROPERTY LOSS coverage successful people have in place does not account for what they have accumulated and purchased in terms of their décor, furnishings, appliances, fixtures, and clothing. Take a look at your policy and see what the limits are then walk around the house and add up the costs of the contents of every room and whatever you have stored in the garage and attic (bikes, sports equipment, holiday décor, etc.) and you will likely be stunned by the amount of money you have tied up in those things. Now imagine having to replace all of them out of pocket in current dollars…
Second, we often see that valuable collections of personal property are under-insured, uninsured, or completely excluded from certain policies. Common examples include guns, high-value electronics, and jewelry.
Finally, make sure the alternate dwelling and replacement cost for complete loss coverage you have in place is adequate for your current family. The policy limits you put in place while single or newly married may not be enough to cover adequate housing for your family of four with two pets while your home is being rebuilt. Similarly, the construction cost of your home at its current level of finishes and upgrades may be substantially above what your insurance company thinks is “reasonable, adequate, or equivalent”. If you have spent large amounts of money upgrading your home, finishing that basement, and redoing the kitchens and bathrooms, you know what’s involved; be sure your carrier knows too.
In the first part of the “family risk drill,” we covered a variety of issues related to your legal, financial, and insurance preparedness for a variety of risks including disasters like floods, fires, and other losses. Since that time a massive two-state, two-country blackout was in the headlines, shutting down power for several million people in Arizona, California, and parts of northern Mexico. Thankfully, the grid was restored in about 24 hours, but even that short amount of time did millions of dollars in damage and resulted in food losses, business closures, security risks and airports being shut down, not to mention that it required the shutdown of two reactors in a major nuclear power plant.
The majority of disaster preparedness experts aren’t concerned with terrorists, zombies, or enemy invasions. They are worried about issues like natural disasters, technology failures (like power grids), and pandemic illnesses.
Imagine how many parts of the country would be devastated by prolonged power failures in the extremes of an East-Coast or Midwestern winter or the brutal summer in the southwest and the possibility of a disaster becomes much more realistic in our technology driven age.
Do You Have a Plan Everyone Knows?
Have a simple plan on two key issues: where you meet if the home is lost, damaged, or inaccessible and who you call or go to if you need to leave a message or have lost your phone or transport. In some cases, just having a place to check-in is vital. If your spouse or kids could not get home because of a natural disaster, do you know where they would go instead? Do you know who they’d go to instead or check in with if their cell phone was dead?
Are Your Digital Assets Safe?
Much of your vital information is stored on a computer in the home that could be easily damaged or stolen. Make sure it’s backed, up, invest in back-up power supplies, and think about the security of those items like any other easily portable valuable. Remember that having a back-up drive that’s on the floor, under a desk, or a place likely to be stolen with the computer if your home is broken into is not much help at all, especially if you need the backed-up photos and scanned receipts to document the contents of the home that are damaged or missing. Consider using services like Lo-Jack and various cloud storage options for your computers and take advantage of the “Find My Device” features on Apple products like iPhone and iPads before a problem occurs when they are lost or stolen. Finally, password protect all computers, drives, phones, etc.
Can You Last Even a Few Days Without Technology?
Remember that we are extremely vulnerable due to our dependence on electricity and computers. Even most affluent people have very little cash on hand, a fact that renders them penniless during something as simple as a blackout or other weather emergency that will either make banks and credit/debit cards inoperable or inaccessible if they shut down due to a “run” on the bank for cash in a panic. During a prolonged period of extreme weather or a power failure food will spoil quickly and the few stores that do open won’t be able to take your credit or debit cards, only cash.
In most places the same is true for gas stations, natural gas, and even tap water, most of which is controlled by electric pumps and regulators somewhere. Make sure you can last at least a short period of time with what’s in your home. This means reasonable amount of food, water, sources of warmth, and perhaps most importantly a short reserve of prescription medicine for those who are dependent on it for life-sustaining issues as simple as insulin. Also, if power grids are down, the dispensing of controlled medications requiring prescriptions will come to a complete halt. Ever been to a Walgreen’s when the “system is down?” Then you know what I mean. Got a big co-pay? Good luck paying for it without your credit cards working even if the store is partially open.
This is perhaps the most controversial issue. This does not just mean guns, however it can often mean simple things like locks, light sources, walkie-talkies and even a good old fashioned big dog with a big bark. Think about your home and the vulnerabilities that arise in the kind of extreme situations addressed above.
As always, the list could be pages long. This discussion has a simple goal; to get you to start thinking about your exposures and address them in a calm and reasonable way, as preventative medicine.
As always, the information presented here is general and educational and can never replace the advice of experienced counsel specific to your assets or situation. This article originally appeared at www.PhysiciansPractice.Com where Ike Devji is a regular contributor, and is reprinted here with permission.