Common things left undone can cause serious consequences

In discussions with clients about their financial objectives, we often uncover things that need to be addressed but were put on a back burner. This month, I thought it might be beneficial to identify some of the most common things I’ve found that can cause serious consequences by being left undone.
I like to review life insurance policies or have a home owner’s policy reviewed for a price quote. Many times, there are errors in coverage, beneficiaries, or ownership.
Keeping up with the correct beneficiaries on life insurance and investment contracts is a common problem. It is a sad situation when someone you love who had no relationship with an ex-spouse inadvertently leaves everything to that person instead of you. You can imagine how sad and uncomfortable these situations can become.
When marriage ends in divorce, many documents require name changes. Some of the more common documents requiring change are driver’s licenses, passports, green cards, wills and trusts. Make sure all documents are changed. Personal situations dictate what you should do and what works for your situation. What works for your family may not work for another family. Don’t forget to pay attention to living wills, medical directives and who is responsible for minor children should an untimely accident or illness occur to one or both parents.
This moves right into real life situations where people do not plan for their own death. This is often a difficult set of decisions that are frequently left for someone else in the family to address. This situation forces someone to try to be fair for all family members but the likelihood of doing what was intended almost never works in reality.
Frequently, people neglect to consider name changes associated with property and casualty insurance. This can result in serious consequences should a claim need to be made. To pay a claim, the insurance must be in the insured person’s correct, current name.
Some of the most common problems that impact property and casualty insurance typically are created by name changes that impact this coverage. Revocable Trusts typically are created to ensure that a property is protected from liability and not involved in probate.
When a revocable trust is created, it becomes owner of the property, typically through the quit claim deed process. The problem is now that the owner of the property is the trust (an entity), not a person or persons.
Some insurance carriers will not insure a property that is owned by a trust and you don’t find out until you try to make a claim. In this example, the trustee is no longer valid as the insured. Many people don’t think to tell their insurance agent about the change in ownership because they consider themselves as the owner since they are the trustee.
The coverage for liability on a home really can become an issue when the trust is named in a lawsuit for an injury and coverage is in your name as it was before the house was put in a trust. A carrier may deny coverage in this case. Don’t let situations like this end up in court.
You can cause an even greater problem if you leave an insurance policy in your name and then decide to rent your home to someone else. Know that you have changed the use of your property from “home owner” covering yourself and your property to “renter” covering only the property with no liability for someone else.
The insurance cost will tend to be higher but if you have a claim and the insurance company denies it, then your cost could be more than the difference you would have paid in your annual premium.
Don’t rely on the fact that insurance companies will understand that you just did not know the impact of not changing your insurance coverage and offer the coverage you want but did not pay the higher premium for.
Unfortunately, we often do not find out the impact of some of our decisions – or non-decisions – until we have the need for a claim. I encourage as many readers as possible to review their personal risks and include professionals to help in that process as there are options available in many situations. A good financial person can help identify the financial impact of decisions but remember that ultimately you must make your decisions.

Capt. Mark A. Cline is a chartered senior financial planner and mortgage broker. He is a partner in Capital Marine Alliance in Ft. Lauderdale. Comments on this column are welcome at +1-954-764-2929 or through