Property and Casualty Insurance


Property and Casualty Insurance: Don’t leave home without it!

A major crisis. Last year, a friend’s parents’ life took an unexpected turn. While on vacation, they received a devastating phone call informing them a fire destroyed their home and belongings. Left only with the clothes they had packed; they returned to assess the damage and contacted their insurance company to start the recovery process. Unfortunately, through the process they discovered their outdated insurance policy did not have enough coverage to cover the cost to rebuild their house back. The financial plan they thought was solid crumbled in an instant.

Although often overlooked, Property and Casualty policies are an important pillar in your financial plan and need to be reviewed and updated regularly. We are excited to announce that Compass will now be incorporating reviews of your Property and Casualty policies into our financial planning process. We will offer recommendations for improvements for you to discuss with your insurance agent. If you would like us to review your existing policies, please let us know and we can start the process. Until then, here is a primer on Property and Casualty Insurance policies.

The Basics 

Property insurance provides coverage for the unknown and will replace the value of your property if it is damaged or destroyed in an accident.

Casualty insurance is liability coverage. It protects you from potential legal and financial repercussions of personal liability. Whether it’s a slip-and-fall accident on your property or accidental damage caused by a family member, liability coverage can shield you from substantial legal expenses and settlements. It is important to understand the fine print of your insurance policies. Deductibles, coverage limits, and exclusions can significantly impact the effectiveness of insurance.

Here are a few best practices to keep in mind when reviewing your policies.

Ensure Adequate Coverage

Home Value: Confirm that your property insurance coverage is sufficient to rebuild your home in the event of a total loss. It is important to recognize that this is the cost to build your home today, which may involve periodic reassessments, especially if you make significant renovations or improvements, or if building costs increase significantly.

Personal Belongings: Take stock of your possessions and consider the replacement cost. We recommend walking through your home and taking a video at least once per year of all your belongings. While tedious, it could be crucial in remembering everything you had in the event of a disaster. Confirm that your coverage limits are adequate to replace these items in case of theft, fire, or other covered perils.

Liability Insurance: Assess your potential liability risks. If you own a home, have a pool, young children, dogs or even a trampoline, it is important to have these items covered. Umbrella policies are an effective way to provide extended coverage.

Auto Insurance: Confirm your auto liability coverage is enough to protect your assets in the event of a serious accident. Consider additional coverage beyond the state-mandated minimums. Most people think of damage to their car when in an accident, but you want to make sure you have coverage in the event you destroy other property or injure others.

Business Assets: If you own a business, make certain that your commercial property and casualty insurance adequately covers your business assets, liability risks, and potential business interruption.

Take Note of Your Risk Tolerance

When determining the amount of insurance you should have, it is important to evaluate how much risk you are comfortable with. If you are willing to cover costs out of pocket for events that may be unlikely to happen, you may want a higher deductible policy, or lower overall coverage. While higher coverage levels provide more protection, they also come at a higher annual cost. Work to find a balance that aligns with your financial situation and risk tolerance.

Utilizing Riders: Tailoring Insurance to Your Needs

To further customize insurance protection, riders are an invaluable tool. These additional clauses or endorsements allow you to extend coverage beyond standard policies. Depending on where you live, what property you own, and what risks you may encounter, you will want to add riders to cover your family. Riders can be added to cover additional living expenses if your home becomes uninhabitable due to a covered event. This can include the cost of temporary housing, meals, and other necessary living expenses.

Bundling Policies: A Cost-Effective Strategy

Bundling property and casualty insurance, such as combining home and auto coverage, not only streamlines administrative processes but often results in cost savings. Insurance providers frequently offer discounts to policyholders who choose to bundle, making it an attractive option for those seeking comprehensive coverage at an affordable price.

Regular Policy Reviews: Adapting to Changing Circumstances

Like our financial plans, regular policy reviews are crucial to ensure your coverage aligns with your evolving needs. Life changes, such as moving to a new home, having children, acquiring valuable assets, or changes in family structure, may necessitate adjustments to your insurance policies. Staying proactive and regularly reassessing your coverage guarantees that you remain adequately protected in the face of life’s uncertainties.

Umbrella Policies: Heightening Your Financial Shield

Umbrella policies are a vital component for insurance coverage and financial plans. Unforeseen accidents or legal liabilities can result in significant financial consequences that may surpass the coverage limits of standard insurance policies. Umbrella policies step in to bridge this gap, offering additional protection against lawsuits, medical expenses, and property damage claims. Whether it is a severe car accident or a liability claim stemming from an incident on your property, umbrella insurance provides an added safety net, shielding your assets from potential financial ruin.

Selecting an appropriate coverage amount for your umbrella policy involves evaluating your overall financial situation and potential risks. Consider factors such as your net worth, the value of your assets, and your exposure to potential liabilities. A general rule of thumb is to carry an umbrella policy with coverage that aligns with your net worth. We will work with you to determine an appropriate coverage amount.

Compass Insurance Review Process

As mentioned, we will now incorporate Property and Casualty reviews into our financial planning process. All we need from you to get started is the Declarations page for all your property and casualty insurance policies. We will run a full analysis of each policy and highlight where your coverage is adequate or could be improved. Lastly, we will provide you with a summary to bring to your insurance agent of changes we recommend so that they can review and help you implement changes to your policies.

Property insurance is a cornerstone of a comprehensive financial plan. Which is why we will be incorporating annual reviews into our planning process. We will help in selecting appropriate coverage, regularly reviewing policies, and understanding the intricacies of your insurance. Our goal is to help your overall financial resilience. We want to ensure that when the unexpected happens, you are well-prepared and financially secure.

Compass Wealth Management LLC is a SEC registered investment advisor, clearing transactions primarily through Pershing Advisor Solutions and Pershing LLC subsidiaries of Bank of New York Mellon Corp. This letter is written by Compass for the benefit of its clients and does not necessarily represent the opinions of its affiliated organizations. It is based on information believed to be reliable, but which is not guaranteed to be correct. Nothing herein shall be construed to be a solicitation to buy or sell securities, indicate that past performance is predictive of future returns, or recommend individual investments.

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(203) 453-7000