Meeting Erik LaChance is one of those pleasant cases where a professional partnership grows into a real friendship. Early in our careers, Erik and I worked together on a board of trustees for many years and we came to rely on each other to be the two fresh-faced 20-somethings tasked with bringing an organization into the 21st century. So, when I was looking for someone to interview about property and casualty insurance, I knew Erik was the right person.
I would encourage you to listen to full interview of this episode of ‘Planning on Call,’ the podcast, here:
Follow the links below to listen to The Atlas Advantage on Apple Podcasts, Spotify and Libsyn:
Erik owns a State Farm Insurance office in Colonie, New York, and has built a firm working as a self-described ‘risk advisor’. Erik specializes in property and casualty (P&C) insurance, but also works in all things insurance… this includes life, disability, and even pet insurance! Erik and I decided the entire world of insurance was a little too large to focus on for one episode. For this discussion, we took time to break down how the growth of assets and P&C insurance may be considered through the career life cycle of a physician.
At its core, property and casualty insurance is about protecting your property in the case of damage or destruction, and guarding your assets against liability due to the destruction of another individual’s property or casualty. As Eric explains, as it relates to liability coverage, the first and most important rule is to have insurance coverage in an amount that covers ALL of your assets. As a young physician in training during the ‘grind’ phase of a career, there usually isn’t too much in the way of assets to protect. That said, there are still some important things to keep in mind during that phase.
For many individuals, their first experience with insurance begins with rental insurance. Renters insurance is generally the least expensive, as insurance goes, and protects personal property in case something happens to the insured’s rental (and in many cases, a property owner requires it). Furthermore, even if there is minimal personal property to protect, it still protects the individual against a lawsuit. Early on, it is also important to remember if a person is still on their parents’ insurance they are their parents’ liability. Parents need to have protections on all of their assets in the event their child was the cause of liability.
Erik stresses that most liability claims happen in a car. Many individuals in medical school may have a car. This type of liability claim can get expensive, especially because damages done to a car can exceed the repair needs of the owner’s vehicle. Imagine being the cause of a four-car pile-up, or hitting an electric pole (in which case the operator of the vehicle is not only responsible for the damage to the pole, but also damage to all the cable and electric equipment on top of that pole). Individuals and insurance companies can also potentially go after the vehicle operator in civil court. In this instance, the operator could be required to cover legal fees as well as all the damage caused by the crash. To do so, the court can look at everything the operator owns – including car, bank accounts, personal property, equity in a home, and even future earnings. That said, when it comes to liability insurance, Erik indicated it is generally good practice to have more insurance than the state minimum, even if someone doesn’t have a very nice car. This applies to all parts of car insurance as well – coverages for liability, uninsured and underinsured motorists, collision, medical payments, and personal injury protection.
All of this becomes even more impactful as the physician graduates from training and enters the ‘growth’ stage of their career. As their wealth and assets grow, their amount of liability insurance should grow with them. As individuals become more affluent, they may purchase more “luxury” items like boats, off-roading vehicles, and possibly vacation homes or investment properties. Individuals should have liability insurance accounting for all of these items.
It is often a good idea to get an ‘umbrella’ policy at this point in a career. This is a liability insurance plan that goes over the top of all the other liability insurance policies. Even though the insured may have individual policies on their car, boat, home, etc… the umbrella policy will act as a reserve fund of insurance on top of all of these individual policies. This can be important with a higher net worth, when individual policies on certain items may not provide enough coverage to protect all of an individual’s assets. Remember, an individual’s assets can include future earnings, so getting more insurance during this period of a career cycle can protect earnings and assets which may be growing quickly. According to Erik, the good thing is umbrella policies are usually relatively cheap compared to the coverage they provide, however, it is increasingly important that any potential new liabilities are communicated to their insurance agent. Each new “toy” purchased needs a place ‘under’ the umbrella to have the extra coverage extended to it.
As physicians continue through the ‘grind’ and ‘growth’ phases, they also tend to move around quite a bit. As with other changes, it is of utmost importance to communicate location changes to their property and casualty insurance agent. While people usually don’t think their first call after planning a move needs to be to their insurance agent, it can prove to be beneficial, and the sooner the better. Insurance policies are regulated by the state, which means insurance requirements can vary from state to state. So… if an individual were to move states for training or a new job, they should call their agent!
The last thing Erik brought up for this stage of a physician’s career was to keep business ventures separate from personal assets. Both business and personal property can and should have liability protection, but he indicates it may make sense to keep them separate by creating entities like Limited Liability Companies (LLCs) for business ventures. You should confirm all implications of such ownership with a lawyer, but, big picture… you never want your business assets to potentially jeopardize personal assets. While it is generally a best practice to keep these assets protected separately under specific and, often times, multiple insurance policies, policy updates should always be considered unique to the insured and changes made should be done under the advisement of your own trusted insurance agent/ provider.
As physicians get closer to the end of their careers, everything we discussed still applies – and again, it may get even more important. Make sure asset levels match liability insurance levels and note that a person may have investment accounts that are growing pretty substantially (note that employer-sponsored retirement plan accounts are protected from liability claims). Just as it is important to keep in mind during the ‘grind phase’, remember that kids can be a source of liability as well. If a parent purchases a condo or car for their kids in college, these assets need to be protected under the parents’ umbrella policy as well. This even applies to trust assets. Many times individuals will place large assets, like homes, into estate planning vehicles like trusts. If someone is using these vehicles and an asset moves from their direct ownership into a trust, they may need to make some adjustments to maintain coverage under their liability policies.
This leads into the last, overarching remark Erik stressed – as your life changes, so must your property and casualty insurance. Your insurance agent might not be the first person you think to call after major life decisions, but they should be high on the list. Especially, as your assets grow quickly… so plan 3 to 5 years out and keep your insurance agent in the loop. One way to make this easier is to think of the individuals managing your assets as a team, put your players in contact with each other. For example, if your insurance agent is in communication with your lawyer, real estate agent, financial advisor, or accountant, there is a better chance he or she will be able to obtain all the information necessary to protect all of your assets properly. As with everything, communication is key!
And consider hiring a good financial advisor who can assist with the communicating for you…
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