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Page 1: Parr Insurance Brokerage

C H E C K O U TFORACHANCETO

AN IPAD MINIWINOUR WEB DEMO

Page 2: Parr Insurance Brokerage
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Parr Insurance Brokerage 2157 N Damen Ave Ste 2B

Chicago IL 60647

P: 773.489.3001 F: 773.489.5908

JUNE JOHNSONACCOUNT MANAGER

[email protected]

Page 7: Parr Insurance Brokerage

PARR

INSU

RAN

CE BRO

KERAG

E

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How does one’s fi nancial success become a costly liability – literally?

It happens when a high net worth individual or family becomes the target of a successful multi-million-dollar liability lawsuit and the damages awarded far exceed the coverage provided by insurance. And it happens with greater frequency than one would expect.

Unfortunately, a number of wealthy individuals do not devote enough attention or time to best protect their fi nancial assets and future earnings. They tend to underestimate the multitude of risk factors their lifestyles present and the high levels of liability damages often awarded. The affl uent need to understand that if an accident or other incident occurs, an excess liability policy is essential to cover costs that could go well beyond the coverage provided by their existing insurance policies. This article explores these issues and outlines how to address them.

Understanding Liability Risk FactorsSituations such as an automobile accident, or a worker or guest injured at one’s home, are easily recognized as events that pose liability risks and concerns. Yet, even these typical types of incidents present greater dangers, and occur in larger numbers, than imagined. And, at times, this is due to one’s wealth.

The reasons for the latter are two-fold. First, high net worth individuals and their families often have active lifestyles and busy schedules that can increase their exposure. Secondly, just the fact that they have major assets can prompt lawsuits that seek signifi cant damages.

For example, when analyzing one’s exposure to risk due to a car mishap, the number of teenage car drivers at home is a critical factor to address. Another issue to cover is whether long commutes to work occur on a daily basis. Obvious scenarios, true.

About the AuthorMelissa Neis is Vice President of Chicago-based Parr Insurance Brokerage, an independent insurance agency founded to protect high-net-worth individuals and families. After working several years in the arts, she joined the Parr team in 2005 to apply her knowledge of art to the insurance world. Melissa graduated from Illinois Wesleyan University with a BFA in painting and a minor in art history and earned her MBA from University of Notre Dame in 2013.

Inadequate Liability Insurance May Prove Costly For Wealthy Families

PH: 773.489.3001 FX: 773.489.5908 www.parrinsurancebrokerage.com

Risk Factors, Level of Damages Often UnderestimatedBy Melissa Neis, Parr Insurance Brokerage

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However, what if an accident involves colliding with a mini-bus carrying 15 or 20 people? One may be liable for damages awarded to all of the injured passengers, particularly if resources exist to cover such expenses.

For the wealthy, owning more than one home is the rule rather than the exception. Multiple homes and homes with swimming pools certainly increase liability risks.

A less obvious risk factor that involves personal residences, yet frequently evident, is the employment of domestic employees such as a cook, driver or housekeeper. In addition to sustaining an injury while on the job, one needs to be protected against potential lawsuits that relate to discrimination, sexual harassment, wrongful termination and other issues. These workers may know more than most about the fi nancial wherewithal of their employers, and if they are disgruntled or feel maligned, see a lawsuit as one way to gain signifi cant compensation. Adequate insurance is a must for such scenarios.

Among other situations that may impact one’s liability are:

Ownership of watercraft. Yes, insurance policies for such vehicles will cover a number of claims, but may not provide enough coverage in a liability situation.

Nonprofi t board positions. Many wealthy individuals volunteer to serve on boards of directors for not-for-profi t organizations. But if these groups do not provide adequate liability insurance for directors and offi cers, or none at all, board members could be at great risk if the organization is sued.

Social media accounts. Those who blog, tweet or post comments on social media platforms are at risk if such remarks are viewed by an individual as slander, libel or character defamation. Yes, the Internet poses a risk factor never imagined two decades ago.

Recognizing the Risk LevelsAnother major issue not understood is the amount of damages awarded in liability lawsuits. According to a 2012 survey conducted by the ACE Group of high-net worth households, more than half – 51 percent – remarkably believe the highest amount of damages they could be held liable for if someone sustained serious injury as a result of an accident involving their vehicle or on their property is

less than $5 million.

Without question, a reality check is needed here. A review of media coverage across the nation will reveal verdicts and settlements in such cases are in the multi-millions, particularly if plaintiffs have permanent disabilities as a result of the incident. Even events that appear minor at the outset can generate major awards. Here’s one case in point:

The insured client, a member at an elite health club, had a disagreement with another club member about rules concerning the running track. The dispute escalated to a shoving match, and the other club member, who was a surgeon, fell, breaking his wrist. The injury prevented the surgeon from operating for the remainder of his career with an annual loss of income of more than $500,000 annually. The overall claim value was $13 million in lost wages, not even calculating medical costs, punitive damages, and pain and suffering.

Then, there is the straightforward fact that one’s wealth status alone serves as a catalyst for liability lawsuits that seek huge amounts of dollars. Plaintiffs and their attorneys aware of the high assets owned by the defendant likely will seek larger payouts than if the defendant is not affl uent.

There also are common law joint and several liability statutes on the state level than can exacerbate the situation. If several parties are found liable, the statutes allow the plaintiff, if desired, to collect the entire judgment from just one defendant. In such instances, attorneys may target the one defendant with the greatest wealth. These are the dynamics one can expect in this litigation-driven era. Interest in Insurance Issues Lacking

It’s no surprise that allocating funds for insurance is not as compelling to people as making and monitoring investments in the stock market, real estate or other more intriguing, income-generating vehicles. Wealthy individuals, understandably, devote much greater attention to increasing or, at the very least, maintaining their signifi cant assets. Protecting them via this mundane mechanism called insurance can be quite low on their radar.

However, this mindset provides yet one more reason why so many fail to obtain suffi cient liability coverage and do not factor in the worst-case scenarios. Many affl uent individuals

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are comfortable with the typical $1 million or $2 million umbrella policy sold by the carrier who provides their other policies. There also may be a belief that more coverage will require substantial increases in premiums, a cost they can skirt with minimal impact. Such assumptions are both inaccurate and possibly dangerous to one’s fi nancial well-being.

Another risky area involves the adult children of the affl uent. Here, too, disinterest or lack of understanding of the impact liability settlements can have on their holdings or inheritances may result in signifi cant fi nancial losses.

How Much Is Enough? How much excess liability coverage should one purchase? Of course, there is no absolute answer to the question. Coverage typically can range from as little as $1 million to more than $50 million in the United States, and additional coverage may be secured by purchasing multiple excess liability policies.

But one should not begin with a specifi c number in mind. Thinking strategically is the key. One should:

• Detail and analyze all or the risk factors

• Avoid being conservative when identifying those risk factors, determining a coverage amount and budgeting for premiums

• Think of worse-case scenarios to help ensure protection will be adequate

• Consider all of the assets that could be impacted if coverage is lacking, such as retirement plans, trusts, real estate holdings and even one’s income possibly being garnished

• Factor in existing policies and current liability coverage to ensure the excess liability policy ideally complements current coverage, and there are no loopholes or gaps in coverage

One’s specifi c profi le will dictate the coverage required and, in turn, premium costs. To provide some frame of reference, here are three estimated annual premiums for a client who owns two homes and two automobiles:

Coverage limit of $10 million: estimated annual premium of $1,400

Coverage limit of $20 million: estimated annual premium of $6,500

Coverage limit of $50 million: estimated annual premium of $24,000

Considering what could be at stake, such premiums are less expensive than most people anticipate. Insurance fi rms that focus on high net worth individuals have designed programs specifi cally for the inherent risks associated with this lifestyle. Therefore, the premiums for such policies are relatively inconsequential in comparison to the potential liability.

www.parrinsurancebrokerage.com

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2157 N. DAMEN AVE.SUITE 2BCHICAGO IL, 60647

How to Take ActionHigh net worth individuals often rely on trusted, knowledgeable advisors when major fi nancial decisions must be made, and liability protection warrants expert counsel as well. One approach is to enlist an independent insurance agency or broker that focuses on affl uent clients. These fi rms, unlike agencies that represent a bevy of insurance products and a variety of clientele, provide the in-depth expertise the wealthy expect and demand. Alternatively, some fi nancial advisors may bring this knowledge to the table, or liaison with these insurance agency specialists, and can offer expert guidance.

An experienced, knowledgeable insurance specialist or fi nancial counselor will understand the many nuances in available policies and coverage. For example, it may surprise many that no more than a handful of insurance carriers offer products specifi c to this market segment, and likely should be the source for the best plan of protection. These experts can work together to create a long term plan that addresses the various risk factors, incorporates existing policies and ensures minimal risk is achieved.

High net worth families should – and must – recognize they have the most to lose in a countless number of liability situations. But they do have the resources, both in terms of knowledgeable counselors and fi nances, to protect those hard-earned assets.

About ParrChicago-based Parr Insurance Brokerage is an independent insurance agency founded to protect high-net-worth individuals and families nationwide with customized insurance coverage for fi ne homes and possessions. Through national and global carriers, Parr Insurance provides coverage for high-value homes, automobiles, valuable articles, and collections. For more information on Parr Insurance Brokerage services, contact an agent today.

P: 773.489.3001 F: 773.489.5908 E: [email protected] www.parrinsurancebrokerage.com

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An intriguing irony exists today in many standard apartment leases. There are rules

that cover a number of essential areas ranging from payment terms and security

deposits to pets, smoking restrictions, workout facilities and more. The regulations are

designed to protect landlords from fi nancial liabilities and the property from damage,

improper egress or other dangers.

But, far too many agreements fail to include a requirement that can protect landlords

from even more signifi cant costs. The missing clause? Stipulating that the prospective

tenant has renter’s insurance before legally occupying the residence.

Consequences May Be Devastating

Based on our experience, the benefi ts for landlords to require renters insurance have

remained off their radar screens. Over the past few years, we’ve witnessed a growing

awareness of its value, but not necessarily a groundswell of action.

This is rather startling as the pitfalls from this inaction can be devastating for a

landlord. No matter how many safety and security measures are put in place,

accidents can still happen any time. When tenants are uninsured, responsibility for

recovery can be unfairly placed on the landlord. Here are some examples from our

experience:

A Chicago-area renter asked a neighbor to help move some furniture. While lifting a

heavy mattress, the neighbor fell and broke his knee, requiring surgery. He didn’t have

health insurance and fi led a claim against the tenant to pay the substantial medical

bills. Unfortunately, the tenant didn’t have renters insurance and barely had any funds

to pay the costs. The injured party proceeded to fi le a claim against the landlord. The

landlord’s insurance policy paid, but when the claim added to his existing loss history,

his premium rates skyrocketed.

A 24-unit apartment building in the Los Angeles area sustained a major fi re resulting

in substantial damages. Most tenants in the building were older, had lived there for

20 years or more, and wanted to remain in the building. But in addition to losing their

possessions, the tenants needed to move as the building no longer was habitable. The

landlord spent hundreds of hours helping uninsured tenants fi nd new accommodations

About the Author

Melissa Neis is Vice

President of Chicago-based

Parr Insurance Brokerage,

an independent insurance

agency founded to protect

high-net-worth individuals

and families. After working

several years in the arts, she

joined the Parr team in 2005

to apply her knowledge of

art to the insurance world.

Melissa graduated from Illinois

Wesleyan University with a BFA

in painting and a minor in art

history and earned her MBA

from University of Notre Dame

in 2013.

The Crucial Missing Clause In Apartment Leases? Mandate For Renters Insurance

PH: 773.489.3001 FX: 773.489.5908 www.parrinsurancebrokerage.com

Affords Landlords Greatest Protection, New Software Programs Facilitate Tracking of Policies By Melissa Neis, Parr Insurance Brokerage

Page 13: Parr Insurance Brokerage

while concurrently quarreling with them over who was

responsible for replacing their belongings. Although

the landlord had insurance to replace the building, his

business suffered as a result of the time, energy and

stress of assisting uninsured tenants throughout this

traumatic event.

A tenant started a bath in her unit in Florida, then left

the bathroom to answer an hour-long phone call,

forgetting she left the water running. The tub overfl owed

and water cascaded down to the apartment below,

creating signifi cant damage to that tenant’s bedroom

furnishings, computer and television. Neither tenant had

insurance. The tenant in the apartment below sued the

landlord to pay for the damages, again a case where the

building’s insurance compensated the tenant…and the

landlord’s premium rates surged.

We frequently hear horror stories such as these

from landlords. And often there are situations when

uninsured tenants will argue, rightly or wrongly, that their

belongings were damaged due to an issue with the

building, and may even fi le a suit to recover such costs.

Then, the court needs to determine who is liable.

However, tenants with renters insurance can alleviate a

number of these potential issues. Such policies provide

a source of recovery to landlords for damage to the unit

if the tenant is at fault and to tenants for their personal

property damage…and a way to avoid any dreaded days

in court for both parties.

In addition to higher premiums, legal issues, and the

wasteful time spent to handle such matters that a renters

insurance policy can prevent, another negative impact

is the potential of rent delinquencies. Tenants without

insurance can face major cash fl ow problems when they

must repair or replace property with their own funds. This

can lead to slow or non-payment of rent.

Why the Reluctance?

Despite potential dire consequences, many landlords

still resist mandating renters insurance. Until recently,

such reluctance was understandable. Apartment owners

would cite the diffi culty to track and the burden to ensure

policies remain in place for their many tenants.

Yes, a tenant can display proof of insurance upon the

lease signing, but is the policy maintained? Do checks

for premiums bounce? Does the tenant allow the policy

to lapse? Is the coverage adequate? Another scenario

may fi nd a tenant happy to adhere to the mandate, but

wanting the landlord to help fi nd an insurance carrier. Yet

one more burden to handle.

Another issue, although not as prevailing, is the concern

that prospective tenants may decide not to sign the

lease because of the insurance requirement and the

additional cost, even though such protection is in their

best interests. Occupancy rates could decrease, some

landlords may believe. This is a shortsighted perspective

for tenants to take when for the price of – say, one pizza

delivery a month – insurance will guarantee protection

against potential fi nancial disaster.

New Software Programs Offer Remedy

Fortunately, available now are new sophisticated

programs landlords can offer to tenants that feature

software to meet these challenges, particularly in

eliminating cumbersome insurance tracking processes.

For example, these programs can:

Provide landlords real-time access to tenant policy status

Deliver instant online notifi cation when a tenant’s coverage goes into effect and if it’s cancelled

Enable tenants to report claims directly to the

insurance company

One program our fi rm offers, Suite Protector, also affords

signifi cant benefi ts to tenants. It:

Allows tenants to purchase insurance in mere minutes via a user-friendly, web-based platform

Features pre-approved enrollment without credit checks or underwriting questions

Permits online credit card payments

Offers broad coverage including water backup limits, medical reimbursement and emergency living reimbursement, and the opportunity to purchase comprehensive personal liability and contents protection

To utilize Suite Protector, landlords complete an

application for each building, including a break out of the

units. Once underwritten, properties are then pre-loaded

Page 14: Parr Insurance Brokerage

into the system and all tenants are automatically pre-

approved. No service work is needed by the landlord or

the property manager.

Stipulating Renters InsuranceWhether a landlord offers one of these new software

insurance programs, or simply wants to ensure tenants

have renters insurance, the lease must clearly address

the requirement as well as specifying the minimum

acceptable coverage. It may be wise to enlist an attorney

to review the clause in the lease.

According to Julie Jacobson, principal attorney at

Chicago-area based Kovitz Shifrin Nesbit, a leading

condo, homeowner and townhome association law fi rm,

in addition to language that requires a policy, the lease

should state:

A tenant must offer proof that the policy is in effect prior to occupying the unit

A landlord may lawfully evict a tenant if the insurance lapses or if the renters fails to have certifi cation of insurance

Any legal charges incurred with insurance policy violations to the lease will be the responsibility of the

tenant

With proper, legal language in the lease, landlords can

proceed to institute this important rule and attain the

proverbial win-win that mandating renters insurance can

deliver.

As outlined here, the fi nancial benefi ts for landlords

can be signifi cant. They can incur fewer losses and

can achieve increased operating income by retaining

revenue, i.e., lower insurance premiums, that would

have otherwise been applied to uninsured tenant losses

to rental units. Simply stated, landlords can stabilize

costs and mitigate risks.

In addition, astute landlords can use the insurance

mandate as a marketing tool instead of an obstacle to

securing tenants. The ease of obtaining the insurance

should be viewed as an amenity for tenants. It also

represents an opportunity to provide valued counsel to

prospective tenants, reminding them that the landlord’s

insurance covers only the building and not the tenant’s

personal property or personal liability.

Likewise, tenants themselves will be adequately

protected, whether they feel it is necessary or not.

They can avoid huge fi nancial losses from possible

liability issues, damages to personal contents, damages

sustained by other tenants due to hazards from the

tenant’s unit or the cost from temporary relocation, if

needed.

Then there is the benefi t for all concerned that does not

carry a price tag, but is signifi cant. And that’s peace of

mind.

www.parrinsurancebrokerage.com

About Parr

Chicago-based Parr Insurance

Brokerage is an independent

insurance agency founded to

protect high-net-worth individuals

and families nationwide with

customized insurance coverage

for fi ne homes and possessions.

Through national and global

carriers, Parr Insurance provides

coverage for high-value homes,

automobiles, valuable articles,

and collections. For more

information on Parr Insurance

Brokerage services, contact an

agent today.

Page 15: Parr Insurance Brokerage

2157 N. DAMEN AVE.

SUITE 2B

CHICAGO IL, 60647

P: 773.489.3001 F: 773.489.5908 E: [email protected] www.parrinsurancebrokerage.com