Insurance Is Only A Financing Tool

Even most insurance agents incorrectly think that insurance is a way to transfer risk to someone else (namely, an insurance company). Not true.

Insurance is instead merely a way to finance risk. If you cause a really bad accident, you still bear the risk of the lawsuit and the judgment, you just use insurance to help you pay for it. If you don't have enough insurance, guess who makes up the difference...you! That's why the risk is not actually transferred through insurance, only financed.

The point of this clarification is to help you choose what coverages you want and how much you want. If I want to be prepared to pay for $1,000,000 worth of my mistakes, for example, I could try and get a line of credit through a bank, get 4 jobs, or buy an umbrella for $200.

Conversely, there are lots of examples where using insurance dollars to pay for certain losses would be a terrible financial deal for you. If you want to talk about why insurance should often be your last option, I'll be happy to do so.

So keep in mind that insurance is a financing tool and nothing else. It fits great in some places and terribly in others. Your insurance portfolio should take this into consideration as it gets designed specifically for you.

Sharing Blessings Thru Economy & Finance

One of our most precious freedoms in the U.S. is the freedom of enterprise and the access to financial markets that leverage hard work and creativity into a way of life and standard of living that is unprecedented anywhere else in the world. If you need a mortgage for a house, or a small business loan, or insurance, or a checking account, most all of us can get one. Imagine for a second if you couldn’t.

Did you know that 2.1 billion people live on less than $2 per day? If that was you, how would you help yourself fight your way out of poverty? How would you start your own small business? How would you buy seed to start a farm? How would you buy a cow to produce and sell milk?

Fortunately, there are many different organizations and companies across the world that help people do just that – help themselves. They do it by basically taking our great system of finance and economy and shrinking it into smaller points of access. Where there is no economic system to support those who want to work their way out of poverty, the prolific (and growing) microfinance industry provides tiny loans and other financial products that help people get themselves out of despair.

Microlending is not a handout. Loans are required to be repaid and reports delivered to lenders and investors just like we do here in the U.S. Microlending help is designed to help those who help themselves. Want to learn more? There are many fine organizations out there but www.kiva.org is one of the best and one of the easiest to follow and then help (you can support loan requests for as little as $25 and then you’ll be given progress reports on their repayment). Here is my latest involvement as an example of ways that you can make an impact in someone’s life:

Magdalena Agsunod is from the village of Arcon in the Philippines. She is 52 years old, is married and has seven adult-aged children. To make a living, she owns and operates a general store, selling a variety of different products in the local community. She has been engaged in her business for over ten years and earns approximately $115 a month for these activities. In 2008, Magdalena joined ASKI (a non-profit aggregator of micro loans) to gain access to financial services to help improve her living situation and ability to engage in business activities. Magdalena had been granted and has already successfully repaid a previous loan of 9,000 PHP (Filipino currency) from ASKI. This previous loan was used to purchase additional products to sell.

Magdalena is requesting a new loan of 11,000 PHP which will be used to purchase additional products to sell. This will be her 5th loan from ASKI. She plans to use the additional revenue generated from the business to financially support immediate members of her family.

My wife and I just returned from a trip to Prague, Czech Republic. Beyond the fact that the city is beautiful, historical, and unique, we found it very impactful to meet and talk with local residents who have experienced living in conditions we only have read about here in the U.S.

Visiting the old Jewish Town and touring some of the monuments to the tens of thousands of local citizens who lost their lives in camps during WWII was gut wrenching. Nothing makes history more “real” than standing in places where things actually happened. There is an unfortunate history of repeated religious persecution over hundreds of years and it kind of numbs your brain a bit pondering how people can do things to each other that just don’t make sense.

On the other side of the coin, it was inspiring to be taught how much progress and improvement has been made in Prague having been released from the grips of communism only 21 years ago. Our local friends described for us the ways they were educated in school, their lack of religious freedom, their lack of access to even basic things like ketchup, and their inability to design and control their own occupations. We were shown the very few buildings that looked run-down with broken windows and blackened walls and our local friends told us that all of Prague looked that way just 21 years ago. Now, most every building is colorful, cared for with great pride, and demonstrates a level of art and engineering that is such a strong part of Czech heritage.


The reason I mention this is because it really reminded me how lucky and blessed we are to have opportunities that some people just never get. Most of us are taught that we can achieve whatever we want. Most of us have access to opportunities that we can forge into tools to achieve our self-defined success. Most of us have the luxury of planning for the future and living as we please because our basic needs and safety are provided for. Travelling to beautiful Prague showed me how precious this is and it motivates me even more to be more in control of how I want to live so that I take full advantage of the opportunities just laying at my feet here in the U.S.

A Full Life

I have great admiration for people who seem to be making the most out of life and I enjoy reading stories of adventurers and those living “non-traditional” lives. Like the family who sold everything and is biking from Alaska to the southern tip of Chile. Or the family who builds schools in Afghanistan. Or the twin accountants from Colorado who are trying to ski each of the world’s 7,000-meter peaks. Or Laird Hamilton, the guy who surfs all the time.

Not all of us want to live just like that, but we each have the same opportunity to live just as fully. If you could design your own full life, what would you do with it? With whom would you spend it? Do you have a tugging in your gut that is telling you that you want to live differently? Whatever that may be, that is your adventure.

What does this have to do with insurance? Nothing directly. But we have seen dreams of adventure, of retirement, of career changes postponed or cancelled because of unfortunate losses uncovered by insurance because of poor planning.

Too often the insurance part of your financial plan is seen as the wet blanket, as the conscience that keeps you from doing what you want. But we see it completely different than that. If you want to be in control of your own adventure, having a good insurance plan means you don't have to stop if something happens. In fact, we think having confidence that your risk plan is up to snuff gives you greater freedom to pursue more of what you want.

Making sure all wheels of your financial life are turning at the same speed is important, and we're but one small piece of your financial puzzle. But when called upon to help you design an insurance plan that fits your goals for living, we'll be there! You dream it, we’ll help plan it.

Non-profit of the month: Renton Area Youth & Family Services

Our non-profit for the month of August was the Renton Area Youth and Family Services (RAYS). Our $250 monthly donation to a local non-profit was made to RAYS last month. In addition, we give $5 to the monthly non-profit for every referral we receive from our clients, so thank you! Who is RAYS and how did we learn about them?

The mission of Renton Area Youth and Family Services (RAYS) is to strengthen the lives of children, youth and families by restoring hope and stability in the face of emotional conflict, substance abuse and poverty. In partnership with the community, RAYS transforms the lives of kids and families through comprehensive counseling, training and support.

Mark Bratton, owner of BlueLine Communications (http://www.bluelinecommunications.net/) and President of the RAYS Board of Directors, is a great friend to Wall Financial and is perhaps the Puget Sound’s leading expert in copywriting and communication strategy. Through him we were attracted to RAYS. Says Mark , “I was initially drawn to support RAYS because of their mission, but it was the amazingly talented and dedicated people who are working every day to fulfill that mission who made me want to become more deeply involved with the organization.”

RAYS has served the greater Renton community for 40 years and is proud to have recently received the Business Excellence Award for Best Non-Profit from the Renton Chamber of Commerce. To learn more about RAYS, visit http://www.rays.org/ or contact Jolene Bernhard at 425-271-5600.

Newbie, Brandon Hemphill

We are happy to introduce our newest member of Mechelsen, Inc, Brandon Hemphill

Brandon was born in Seattle and grew up in Sammamish where he graduated from Skyline High School.  He then went to University of the Pacific on a golf scholarship and played on the golf team. While at the University of the Pacific he served as the Treasurer of the Associated Students of the University of the Pacific.

Brandon earned his bachelor’s degree in business administration and finance and moved back to Seattle where he has served as a financial planner and insurance & investment advisor with another firm in Redmond. Since we have a team approach in working with our clients you will very likely have a chance to work a bit with Brandon and he also will be working with his own clients.

Brandon is a coach for the Field of Champions baseball program in Issaquah and serves as an intern on the board of directors for the Joshua P. Williams foundation in Sammamish. Brandon also recently earned a spot in the Guinness Book of World Records. You’ll have to ask him about that…

Year-round Umbrella Season

What is often referred to as an umbrella policy is actually best called an excess liability policy. Just as its name implies, this kind of insurance extends a layer of liability insurance coverage over-and-above what you carry for liability on your home insurance and your auto insurance.

The occurrences of “normal” people having “normal” accidents where final judgments wound up exceeding their home and auto insurance limits is rather staggering (and frightening). We have many first-hand experiences where court verdicts exceed someone’s insurance limits, leaving personal assets exposed to liquidation. Yuck!

Nearly everyone has some exposure that would benefit from an umbrella policy. These policies are very affordable, customized to address your needs, and are surprisingly easy to understand. They can also extend their limits over boat insurance policies, landlord policies, and secondary property policies.

We strongly recommend that you talk to us about either adding an umbrella policy to your insurance portfolio, or talking to us about the adequacy of the one you currently have!

Discounts vs. Savings

The insurance industry selling "discounts" is a red herring, in my opinion. Every commercial for every insurance company touts "we have discounts" and none of them should entice you to buy. Would you fall for it if someone advertised a free car if you bought a $26,000 steering wheel? No, you'd recognize that the car is worth $26,000.

Insurance discounts don't work the same way, but they are nearly as ridiculous because many discounts aren't related to anything you can do about anyway. Multi-car discount? You either have more than one car or you don't and you aren't going to go buy another car just to get a discount on the insurance. One of our best insurance companies has 13 auto-policy discounts and I say only 2 of them can be "pursued", meaning that you could choose to go get it versus it just being there for you if you qualify. In other words, the "discounts" are just how they are going to price you, not how you can exert control over your own insurance costs.

Instead, I say forget the marketing that is meant to fool you and concentrate on making conscious decisions about your insurance that do directly impact your total premium. Carry high liability limits, but increase your deductibles. Make sure you have replacement cost for contents, but think twice before buying bells and whistles to your policies (that aren't really insurance anyway). Choose a robust insurance limit on your home, but really question if earthquake insurance for your clothes and sofa makes sense.

The insurance industry has worked very hard over the last 10 years trying to make you believe that you don't have to think when it comes to your insurance protection (i.e. cavemen are just as capable), but it's much better for you to keep control and make educated decisions about what is important to you. Falling for the "discounts" trick is bad news if you aren't spending time on the design of your coverages first!

Borrowed vs. Rented Watercraft

That's me pulling kids around on Flathead Lake in Montana last week. Did you know that my insurance coverage is different depending on whether or not I was renting the SeaDoo vs. borrowing it? It's true.

Unfortunately for me, I think about that kind of stuff while I'm on vacation. But fortunately, I knew what I needed to do about my insurance so that I could stop thinking about work and instead have fun trying to knock my nephew off the tube!

Schedule Jewelry, Art, Collections, etc.

One of the most fequent discussions we have with homeowners is the question of whether or not they should add a special schedule of insurance for their jewelry. Here's why you might want to consider scheduling special coverage for jewelry, art, collections, etc.

1. Most policies limit the amount of insurance for theft of jewelry. If your jewelry burns, no problem because the policy will be there for you. But if it is stolen, some policies limit theft of jewelry to just $1,500 per item up to a maximum of $3,000 for all jewelry that is stolen. Scheduling jewelry voids/overcomes this limit.

2. No deductible for covered losses.

3. Establishes a set value for the payment of the piece's replacement.

4. Expands the kinds of losses covered. If you just can't find your jewelry or if it drops down the sink, or if your expensive vase breaks, normal policies will not cover that. But if you schedule your jewelry or art, those kinds of losses would be covered.

Personally, I think items 1 and 4 are the best reasons to schedule certain pieces of property, especially when they are expensive. We've helped clients schedule computers, bikes, wine, art, jewelry, baseball cards, guns, cameras, and a bunch of other things.

Not only are a lot of these expensive, but many of the things that our clients schedule are very important to them emotionally. Insurance can't prevent the loss, but sometimes knowing that an important piece can be replaced is quite a comfort!

Microinsurance. Problems Like Ours

I have been interested in microfinance since attending a presentation by Unitus (unitus.com) a few years ago. Even with all of the recent problems in our first-world economic markets, think of the few billion people who have no financial market infrastructure at all. No way to bank, no way to borrow, no way to manage risk, etc.

Anyway, microinsurance is one part of the microfinance movement and smart folks are trying to figure out how to get things like crop insurance and basic health insurance to the poorest regions of our planet. Imagine your family's entire income coming from growing rice and it being wiped out by a monsoon. Get the picture?

It turns out that microinsurance has a hard time selling itself: Insurance has proved its worth for centuries, but people still resist it. They don't like thinking about the possibility of bad things happening. That's why car insurance is mandatory--and health insurance may soon be. If supposedly financially sophisticated Americans have to be coerced to buy insurance, should we really expect people in less rich countries to be any different?

Other theories in this Time article are examined, but I found that explanation above to hit home. I'd prefer to see consumers feel there is value is the less-to-worry-about, and it looks like I've got an entire planet to convince. Better get to it!

http://www.time.com/time/magazine/article/0,9171,1921590,00.html

When Vacant Doesn't Mean "Vacant"

Here's the scenario: Let's say that you bought a piece of land near Lake Chelan with the idea that you'll build a vacation home there someday. Except for a flag pole, there is nothing on the property but grass and trees.

Here's the insurance-policy background: If you look at your home insurance policy you'll see that you probably have automatic liability coverage for "vacant land". If you don't want to look it up yourself, you can just trust me when I say that it's there.

Here's the question: Given the scenario and the insurance background listed above, do you believe that your home insurance policy will automatically cover your vacant land for liability?

Here's the answer: No coverage! Believe it or not there are policies and supporting case law that takes away automatic coverage for any piece of land that has any man-made object on it. And given the examples in multiple court cases, any really does mean any no matter how insignificant.

Here's the solution: So if vacant doesn't always mean "vacant" with respect to you having liability insurance, be safe and just add all properties to your policy so you never have to worry about that. We can usually do this for you for about $2 a month!

So enjoy the new property and the dream house planning without the worry.

Funny Insurance Claim Quotes

Q: Could either driver have done anything to avoid the accident?
A: Travelled by bus?

A customer collided with a cow. The questions and answers on the claim form were:
Q - What warning was given by you?
A - Horn
Q - What warning was given by the other party?
A - Moo

"An invisible car came out of nowhere, struck my car and vanished."

"I had been learning to drive with power steering. I turned the wheel to what I thought was enough and found myself in a different direction going the opposite way."

"No one was to blame for the accident but it would never have happened if the other driver had been alert."

Committed, But Not Married

Domestic partners who share ownership of cars, homes, boats, etc. have the same access to a combined insurance portfolio as married partners. And in many insurance-contract provisions there is no difference between the kind of coverage afforded non-married partners as married partners.

But there is that occassional coverage gap that needs to be addressed and unfortunately, it can have a big financial impact if not handled properly. Fortunately, I don't need to bore you with insurance-speak to tell you how you can fix that gap in coverage for non-married partners, and instead you have to do only one thing and it'll cost you nothing.

Here it is:
If you are in a committed, non-married relationship where you share ownership, financial interest, and responsibility for real and tangible assets, be sure that both of you are specifically named on the policy as a Named Insured. That's it!

You can tell if you are both Named Insureds by looking at how your insurance company addresses your policies. Are both of your names listed on the Declarations Page? Are both of your names listed on envelopes and bills? Better yet, just ask your agent.

Something as simple as making sure you are both listed as Named Insureds is an absolutely critical yet amazingly simple thing to do in order to have confidence in the quality of your insurance program.

Free bonus tip: married couples should both be listed as Named Insured, too!

Rental Car Damage Waivers

My brother-in-law and his family are visiting us from Alaska and have rented a car for a couple of weeks. He asked me if I thought he should buy the rental company's Collision Damage Waiver (CDW).

His insurance policy would cover him for any car he drives in the U.S. or Canada, including the one he rented for this vacation. So I told him that he doesn't need to buy the CDW to replace any "lost" insurance from his own policy.

But I did recommend that he buy the CDW because of what the rental contracts typically commit renters to in the case of an accident. If you get out your magnifying glass and hold the rental agreement up to the light you'll see that in many cases they will hold you accountable for certain expenses and costs NOT covered by your insurance. Things like lost rental revenue, diminished value, etc. These are typically not covered by personal auto policies, but are things that rental car companies will expect you to pay for.

So my recommendation that he buy the CDW is not because of any deficiency of his auto insurance, but because of the financial commitment he's made to the rental car company for things that his insurance will not pay for.

Remodeling? Read This!

I was visiting a client's home to talk to them about their new boat and I noticed that their kitchen had been torn to bits. It turns out they had begun a major remodel of their home's main floor.

Most insurance policies have a provision in the policy that makes some coverage for your home conditional on alerting the underwriter of any action that may increase the expected reconstruction cost of your home. The insurance company wants a chance to make sure that they are adequately preparing for the cost and risk of rebuilding your home, so they want to be kept up to date on things that impact the expected reconstruction cost.

So if you plan on doing a remodel, tell us before you begin. We want to explain to you if/why your policy has the condition we mention above and then address this for you with your insurance company. We'd rather have you worried about choosing the best faucet than about missing out on important insurance coverage!

Kids At College & The Auto Policy

Somewhere among the top 5 questions we're asked is "Now that our daughter is away at college can we remove her from our auto policy?". Our typical answer is "no".

Whether or not your child is taking a car with them to college, they still may be a passenger, a bike rider, or a pedestrian and auto insurance policies actually provide the primary coverage for some of the kinds of accidents those activities sometimes bring.

And just as important, in many jurisdictions the courts have held parents responsible for college-attending children based on a variety of legal tests and standards. So if for some reason a college-attending child causes an accident, you might still be on the hook for the fallout of any negligence. So having the auto insurance to help pay for that is kind of imporant.

But as always, tell us what's going on and we'll talk to you about a solution that fits your unique circumstance. You worry about enough things with kids going off to college, don't let insuring them be another!

Your Most Important Asset Is...

At a seminar I was helping to give I was asked, "What is the most valuable asset to protect?". My answer was easy - your ability to earn an income.

There is no more important element of your current financial security and future financial success than being able to earn an income through work. I find that most families plan very well for things like car repairs and leaking faucets, but do not plan well for risks to their job and earning an income. Fortunately, there are many solutions out there to help manage these risks and they don't all involve buying insurance! No one plan fits all people.

Worry over job security has increased substantially over the last couple of years, and for good reason. But remember, the only difference between a worry and a plan is action.

Sorta Calling Out Other Insurance Agents

I asked one of our customers why she liked her financial planner so much and she said "because they are helping us reach our goals and realize our dreams." Exactly!

I think that most people in the insurance industry completely miss an amazing opportunity to be part of something cool in the lives of their customers. It is a shame that most agents and companies do nothing but apply standard templates of coverage, premiums, and service to everyone who walks in the door. And this is especially apparent with internet and call-center sales and service units. Boring, cold, frustrating, and wasteful.

But we don't want any part of that! We want you to feel like we're giving you less to worry about because we want you to focus on realizing your dreams. We want you to not have to think about losses, claims, insurance, or premiums.

That is why a) we are independent and offer insurance solutions from many different companies, b) why we are constantly going to school so we can be smart in our advice, and c) why we share our knowledge by creating custom solutions unique to every customer.

So when anyone asks you why you like Mechelsen, Inc. we want to have earned your answer to be "because they've helped me worry less and live happier".

Turn Off The Water When You Leave!

When you leave your home for vacation think about turning off the water to your home. One of our customers was already bummed to be coming home from vacation, but was even more bummed to come back to a squishy floor caused by a broken washing machine water hose. Those hoses seem to know when it is the worst time to break, so turning off the water before you go gives you one less thing to worry about while you enjoy your vacation.

Designing A Portfolio To Reduce Insurance Premiums

I just finished an insurance review for a family who was looking for ways to save on their insurance premium. After spending some time with them on the phone and visiting their home it was pretty clear to me that they were better off not switching insurance companies and I recommended that they stay with their same agent and their same insurance company for now.

But I did see ways in which they could improve the quality of their insurance and reduce their premium at the same time. So I recommended they go back to their current agent and have the following things done:

1. Raise the home insurance policy deductible. This family carried only a $500 deductible and they'd save about $150/yr just by increasing the deductible to $1,000.

2. Increase the home insurance liability limit from $100,000 to $500,000. This would cost them about $25/yr.

3. Reduce their coverage for "Other Structures" because they didn't have any on their property. This would save them about $100/yr.

4. Increase their auto insurance liability limit from $250,000 to $500,000. This was going to increase premium by about $250/yr.

5. Increase their auto insurance deductibles from $100 to $1,000. This was going to save them about $375/yr.

In the end, they'll have much better coverage for the more important things, and they'll save $350/yr by getting rid of insurance on the things they either don't need or could cover themselves!

It is important that not everyone consider this a recipe for their own insurance coverage because every family is different and not one plan can fit all people. We only recommended this to this particular family because we worked to understand their situation and help them customize their own insurance portfolio to match.

So while we don't have this family as a client of ours (yet), we feel that their insurance is better, they can worry less, and they'll now have $350 that they can put to better, and happier, use!

My Neighbor's At-Home Business

My neighbor is an attorney who quit practicing at a large downtown firm to start his own law practice from his home. Actually, he is using his detached garage as a makeshift office and the fact that he's using the detached garage as his office is significant.

If he instead chose to work from his spare bedroom, his current home insurance policy wouldn't have any heartburn with the fact that he's running his office from home. In fact, if he worked anywhere inside the confines of his home his insurance policy would work just the same as if he didn't work from home.

But what he didn't understand is that because he is working from his detached garage, the entire policy coverage for the garage would have been completely wiped out if it was damaged by fire, wind, etc! So if his detached garage burned, there would be no coverage to rebuild the garage. It has to do with a little-known exclusion taking away coverage to detached structures that are used for any business venture (by the way, a court ruling many years ago found that even storing boxes of files in a detached structure was enough for an insurance company to invoke this exclusion!).

Thankfully, because he and I talked about his new business we made a slight change to his policy which gave back coverage to his detatched garage for use as an office. Every policy and every situation is different, but the point is that he wanted to pursue his dream of running his business from home and because he brought it to our attention, we were able to help him reduce his worry about his insurance so that he could focus on building his practice.

Free Car! Free Car!

I am so jealous of my friend, Matt. He is region VP of an investment management company and because he travels so much, he is provided a company car. And his company is so cool, they have no problem with him or his wife using it for personal/family business. So basically, he and his wife get the use of a free car. Awesome!

What Matt didn't know is that his company's auto insurance policy would only extend coverage to Matt personally if he were using the car on business. So if his wife was driving the car or if Matt was using it for personal business and they caused an accident, he wouldn't get fired, but he also wouldn't have any insurance coverage for the injury caused someone else!

So then most people would think "okay, no problem, I will just use my own personal auto insurance to protect me". But they'd be wrong. Most policies have a significant exclusion removing liability coverage for autos you regularly have access to but are not owned by you. So that company car sitting in the driveway that you don't insure because your business does? Not covered by your policy!

But there is some good news. All it takes to correct this potentially catastrophic problem is an agent who takes the time to understand all the risks a family faces and then endorsement on the auto policy that will cost between $2 and $4 per month to give back coverage for the use of a car you don't own. And now we all make Matt drive when we go out to dinner.

My Sister-in-law's Cabin

My sister-in-law and her family own a very nice waterfront home on my favorite spot on the planet - Flathead Lake in Montana. We get to visit and stay there for a week every summer and it is one the highlights of our year as a family.

Their home was originally built back in the 1980s and is one of the few homes built literally right on the beach. This is a rarity because in the years following the construction of this home the building ordinances and the environmental restrictions have changed to prohibit any other new home from being built so close to the water. So not only do we get to enjoy the benefit of being on the water's edge, but my sister-in-law gets a slight boost to her home's market value because of this rarity.

But there's a risk to her because of her home's uniqueness. If her home should be destroyed by fire she would not be able to obtain the permits to rebuild her home as it is now because of those changed building codes! And because of the hillside that sits immediately behind the home, the cost to excavate, grade, and shore-up the land in order to rebuild farther back from the water (and meet current codes) would be extremely expensive (an extra few hundred thousand dollars worth)!

Fortunately, we discovered this in our risk review for her and we developed a plan to help reduce her out-of-pocket exposure to these potentially huge extra costs. In her case we worked with a contractor to asses the potential added cost to reconstruction and then added more Ordinance & Law coverage to her home insurance policy. And because this huge potential cost was no longer the same threat to their financial position, it allowed them the comfort to invest in a total remodel of their home just as they always wanted!

Taking care of this risk gave her family the freedom to do something else with their money.

Is My Insurance Portfolio Good? - Part 2

There are three areas where we find the most problems with peoples' insurance portfolios. One of those is the limit of insurance people choose on their home insurance policy. In at least 7 out of 10 policies that we review we feel that consumers do not have enough insurance to rebuild their home.

Think of your Dwelling Limit as being the amount of money your insurance company will pay to repair/rebuild your home if it is damaged by a loss covered by the policy. It is easy to project what would happen if you ran out of insurance money before your home was fully rebuilt!

It seems to us that most people don't choose enough coverage on their home insurance for the following reasons:

1. They confuse market value with the reconstruction value. This is especially dangerous at a time like this when market values have dropped, but we aren't convinced that the costs to rebuild homes have dropped in a corresponding fashion.

2. They rely too much on another insurance agent's suggestion of a Dwelling limit without that agent having ever see their home.

3. They fell victim to an agent who wanted to write the insurance policy so badly that they drove down the Dwelling limit in order to shrink the premium. Yikes!

4. They have had the same policy for many years without ever having an updated review based on today's construction cost realities.

This is another example of the danger of putting insurance ahead of risk management. If you jump right into buying home insurance and choosing a limit of coverage on your house based on no assessment of your risk, then you might be unintentionally choosing to have your home rebuilt without the kitchen, or having to liquidate your IRA to help pay for the job to be completed.

Imagine instead having the confidence that you have a legitimate amount of insurance on your home, giving you the freedom to put more of your other investments to better use than reserving them to pay for a partial home rebuild.

What If? vs. Why Not?

In the movie Along Came Polly, Ben Stiller's character is an actuary/risk expert who is consumed with worry over all the "What If" scenarios in life. And until Polly came along, his life was inhibited by his attitude of fear. For the movie's benefit Ben Stiller's portrayal is obviously a caricature of what most would associate is the risk/insurance professional's attitude and personality.

But we believe good risk management presents the opportunity to have a completely opposite view of the world. Good attitudes toward managing risk means you get to pursue the ideas and wishes you have in your head without the same worry as if you had no "fall-back" position.

Think of your wildest dream and ask yourself why you aren't living it right now. Now suppose that you could take one of those excuses and wipe it away because you planned for it. Now suppose you took the next excuse and planned for it, too. And suppose you kept repeating that kind of planning until you ran out of excuses. Would you then pursue your dream? Would you then be asking "Why Not" instead of "What If"?

Risk management is the license to DO. We aren't saying that every obstacle can be wiped away easily, but we do strongly believe that many people assume that there are no options available to mitigate the risk and consequence of failure, so they don't even try. Fear of failure is normal and healthy, but if you only dream big and don't live big, you might be missing out.

So we advocate listing the excuses for not doing more of what you want and then let us see if we can help wipe them away with a risk management plan. Maybe we can, maybe we can't, but why not give it a shot? Any caveman can sell you insurance, but only your friend can help you live more happily.

Is My Insurance Portfolio Good? Part 1

How do you know if your insurance portfolio is what is should be? What if you are underinsured in some really critical area, or are totally wasting your money buying insurance in an area that is unnecessary?

We have lots of advice to give because a big part of our job is answering the question, "Is my insurance all that it should be?". We begin with posing these questions:

1. How involved were you in choosing your current limits of insurance?
2. How did you decide between your coverage options?
3. Could you summarize some of the major claims that would NOT be covered by your insurance?
4. How often do you conduct a complete risk and insurance review?
5. How did you decide on your deductibles?

We have yet to find a consumer who can answer these questions with:

1. Very.
2. After thorough research, counsel, and discussion.
3. Definitely.
4. Annually, and as needed when things and circumstance with people whom we love change.
5. After determining our risk appetite, our cash reserve position, and comparing the premium savings with the intentional level of self-insurance.

Instead, our clients typically respond with "Uh...will you just do this for me?". Absolutely!

Less Worry. More Happy

It isn't a slogan, it's a purpose. Life is short and it feels like families spend more energy fighting the pressures of time, money, and relationships than they do enjoying the time, money, and relationships that they do have.

We certainly share the common wish that we'll get more of what we want tomorrow than what we have today. That's why we work hard and plan for our futures. But we'd be missing out if we also didn't pay close attention to making the most of today's opportunities.

In our business we provide families with comfort and peace of mind. Whether it's considered a moat of financial protection, or a backstop to life's events, or a brake to prevent a backwards slide in a down market, what we care most about is giving families the freedom to stop thinking about the bad stuff and giving them the license to think more positively about what they have and what they can give to others.

It is our opinion that THAT is what constitutes the real advantage of having a good risk management plan - having the freedom to do and to give.

It's NOT Insurance. It's Risk Management. Here's the Difference

I wouldn't describe my doctor's job as "prescribing medications". I do, however, think that he has worked over the years to understand my exercise habits, my diet, my family medical history, and my attitude toward different methods of treatment. Because of the work he's put toward getting to know me, I think of my doctor as a my body's consultant for maintaining a user-friendly lifestyle.

We don't consider our job to be "selling insurance". Throughout the years we've aimed to understand what our clients love, how they live, and what their attitudes are about risk. We place a high level of importance on being our clients' financial consultant for maintaining a less-worry lifestyle.

Proactive Risk Management

It seems to us that most financial planners care a great deal about building great castles for their clients. Minding good investment strategies, navigating complex tax issues, and creating wealth transfer strategies are all critical elements in building strong financial houses. But really, how much attention do investment-minded planners pay to the moats around these castles?

Your current and future financial stability (and capability) is under constant threat from a variety of risks. Some are sudden and accidental, others are more long-term and preventable. Either way, worrying about what might interfere with your financial plans is just as important as having the plans in the first place.

Proactive risk management is the process of devising a plan that fits with your overall financial position to help defend your castle against unpredictability. This is what we do - build moats.

Safeco Auto Insurance Offers 12-mo Policies

Most insurance companies offer auto insurance policies with six-month policy periods. This means that every six months your auto insurance renews and you are sent new policy ID cards, your rates change (potentially), and you have more paperwork to file.

Safeco still offers the six-month policy, but they now also offer 12-month policy periods on their auto insurance. If this interests you let us know and we can take care of that for you.

Referral Appreciation Program

We do no advertising and instead rely exclusively on referrals from our existing clients. This is because we want more clients like the ones we already have! So when one of our clients is nice enough to recommend us to someone, we want to be sure to acknowledge this incredible gift with a small token of our appreciation.

So if you refer a friend, here is what happens:
1. We will ask how they heard about us.
2. We will send you a $5.00 gift card and a thank-you.
3. We will add $5.00 to our monthly-designated local non-profit donation.
4. Your name will be entered into a monthly drawing.
5. Your name will be entered into an annual drawing.

June's local non-profit is the Issaquah Food Bank. June's monthly drawing is a $50.00 gift card. Thank you so much for all of your referrals. It is the nicest thing you can do for a small business!

Real agents vs. fake insurance salespeople

If I didn't think families were being harmed, I would have a small amount of admiration for insurance companies like Progressive and GEICO. They spend literally BILLIONS of dollars on advertising trying to convince consumers that insurance is all about premium and "discounts". And they are successful at it! Why do they do this? Because they have no real ability to provide three things that agents do:

1) Leadership
2) Relationship
3) Creativity

And because they can't compete with real expertise, they create fake people like Flo, the gecko, and cavemen to convince people that insurance isn't really that important. Their ads are witty, and their message is well-veiled behind the entertainment value; don't consider insurance important for your family, just follow our yellow brick road to the magical land of cheap and easy.

All this is fine until you actually need what you spend a lot of money on. Just wait until you have a loss and then be prepared to bear the consequence of following a caveman's "advice". Your prehistoric coverage might send you and your finances back to the stone age.

Home Insurance Deductibles

Many people are amazed at how far their premium falls when increasing their home insurance deductible from $500 to $1,000. If you can afford to cover the first $1,000 of any covered loss, you'd be wise to see how much smaller your premium would be if you made that change to your policy. And since insurance is best applied toward covering the losses you can't afford otherwise, it makes sense to keep your own dollar and not send as much to the insurance company!

Our blog, version 2.0

If you're looking for our old blog posts, find them by visiting mechelseninc.typepad.com. Going forward we'll be using this site as the place where we share information about the insurance issues facing families and individuals.

We also have new Twitter and Facebook accounts where we can communicate with you.


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