Cindy, a 60-year-old woman and her second husband Bob (63) are enjoying their last few years of working, but are excited for their upcoming retirement in 2 years.  She is an administrator in the U.S. Passport Office and he is a senior engineer at a large avionics manufacturer. They have one son together and they each have a child from prior marriages.  They have been good savers and have accumulated almost $3 million in investments including their respective employer retirement plans. They have no debt and there are no outstanding college costs for them or their children. Bob will have a $600 per month pension from a prior employer and both he and Cindy will get Social Security benefits near the upper payout range.

While driving home from picking berries one afternoon, they are broad-sided by a large SUV travelling well above the speed limit and running a red light.  The smaller hybrid car they are driving is badly damaged on the passenger side where Cindy was riding. It took nearly 45 minutes to free Cindy from the wreckage and her condition was still critical after two weeks of hospitalization. Cindy would never walk, dress or feed herself again.

Bob was devastated by Cindy’s prognosis, but he was equally stunned to find out that the other driver only carried the minimum required state insurance coverage limits.  The state minimums would only provide $30,000 for property and $30,000 medical per incident.  Cindy’s ongoing care was projected to be nearly $200,000 per year for the remainder of her life. Bob’s insurance agent reached out to Bob to explain that his auto policy would cover up to $100,000 of additional benefit by way of the policy uninsured/underinsured rider, but that the same carrier’s $1 million Umbrella Policy excluded uninsured/underinsured claims. Bob now faced the reality that even though he and Cindy had been responsible savers and accumulated sufficient resources for their retirement, their financial position was now horribly compromised by the cost of continuing care for Cindy.

What the Bob & Cindy did not know was that their exposure to this sort of risk could have been easily evaluated and very inexpensively managed. For just $94 per year, their auto policy could have covered up to $1,000,000 of uninsured/underinsured coverage and for an additional premium of $106 per year, their Umbrella Policy could have protected up to an additional $2,000,000 for a total of $3,000,000. Most consumers of insurance seek out the “lowest” premium and shop coverage primarily by premium, and pay too little attention to extent and quality of their coverage.  Even financially responsible investors spend too much time worrying about investment performance and devote far too little time managing the “back door” of their financial house. Unforeseen life events can allow everything you brought in through the front door to slip away out the back.