U.S. adults are taking a big financial risk by not protecting financial assets, especially by ignoring the need for property and casualty (P&C) insurance, a new report concluded.
An “overlooked gap in financial planning that could end up costing consumers thousands or even millions,” wrote authors of the Chubb study “The Overlooked Gap in Financial Advice.”
The gap Chubb references is P&C insurance, and it’s a big one.
“You think the chances of getting into a car accident and having to postpone your career for two years due to injury, or being sued by your neighbor because their child got hurt while playing in your backyard, are very unlikely,” Chubb stated. But those events “are much more common than expected, and the majority are not adequately protected.”
It’s not that Americans don’t want P&C coverage. They do.
Many, however, expect their financial advisors to help them out and find the best P&C insurance deals. In fact, about 40 percent of affluent adults would consider switching to a financial advisor who provides P&C support, Chubb said.
An Opportunity for Advisors
Financial advisors are being presented with an opportunity to better serve their clients by helping with P&C insurance issues.
“The wealth management industry is in the midst of disruption,” said Ori Ben-Yishai, executive vice president and chief marketing officer at Chubb North America Personal Risk Services. “Many leading financial advisors will seize this unique opportunity to provide greater client value, which centers on helping them address their clients’ P&C insurance needs.”
The Chubb study noted that more than three-fourths of successful individuals want their P&C needs addressed by their advisors, but only 28 percent of advisors currently provide this type of support.
“With 85 percent of successful families reporting heavy reliance on their advisor to help them navigate all financial matters, client retention can dwindle if they feel they’re not receiving adequate support,” the study said.
For their part, financial advisors say they already know their clients need P&C insurance, and that they’re on the case.
“Yes, Americans do need property and casualty coverage,” said Valerie Kalsched, group director of sales and marketing at IAT Insurance in Raleigh-Durham, N.C. “In fact, the need for property and casualty insurance is on the rise.”
Not completely understanding P&C insurance contributes to the issue of being undercovered, Kalsched said.
“When thinking about homeowners and renter’s insurance, many Americans forget that this coverage protects the contents inside of your home,” she stated. “As Americans become increasingly dependent on technology, there is a greater need for an in-depth analysis of these risk exposures.”
Procrastination a Problem
Unfortunately, often clients and advisors don’t get smart about insurance until after it’s too late.
“Historically, we see spikes in consumers seeking out insurance following major weather events like 2017’s natural disasters, as they recognize their potential risks and take action,” said Russell Lee, head of underwriting/personal lines at Farmers Insurance.
Insurance can be complex, so it’s important for advisors to note that a client’s level of risk can change over time.
“As people progress through life stages—from being single to getting married, renting to owning, and having pets to having kids, they should re-evaluate their exposures and make sure they’re adequately insured,” Lee explained.
There’s also a societal benefit to having insurance, which is why all states mandate some level of insurance coverage for drivers.
“To the extent you get into an accident with someone, regardless of your personal financial standing, auto insurance will provide some coverage for both parties,” Lee added. “It’s a way to potentially mitigate financial hardship as a society.”
Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at [email protected]
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