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Fire (04/18/2004)
By Al Thomas

I will make a bet with you. I'll bet that if you own your own home you have fire insurance and even "extended coverage". I win.

Now I want to know if you or any of your friends have ever collected on that insurance as a result of a fire. Nobody. Really? Then why are you paying all that money to an insurance company when the odds are so small you will ever collect? And how many fires ever destroy a complete home?

Let's suppose you dropped your insurance today and installed a sprinkler system to put out any fire that might occur. Each year you could put away the insurance premium or spend it to up grade your house.

Then you have a fire. Bad news. But because you have that sprinkler system only one room is damaged. There is loss, but the major portion of your house is in tact. You can repair the damage as it is a partial loss. Life goes on.

You won't do it, huh? You think I'm nuts.

Try this one on for size. You have a nice retirement account. It is what you plan to use when you quit working? Do you have insurance on it? What insurance? Suppose all your investments go up in smoke. Remember 2000? I know that can never happen again. And pigs can fly.

Did you know there is a "sprinkler system" to protect your hard-earned investments? I bet your broker or financial planner never told you about it. And it is free! Brokers and financial planners don't like to tell you about it because it means they will have to work and actually watch your account. On stocks it is called an Open Stop Loss Order. It is like a sprinkler system to protect you from loss of your investments and it only is activated on certain of your stocks when fire breaks out. For your mutual funds you will have to watch them and sell out in case they start down as they did in year 2000.

This Stop Loss Investment "sprinkler system" will protect you from losing any more than 10% of any equity. You protect your retirement account from losing 40, 50, 60% or more of its value as we have seen happen in the past. If you have a financial planner you can instruct him to do this once each week and to sell you out in case any position drops by 10%. Get this in writing. There is no question he will try to talk you out of it, but that is what you are paying him for. Make him earn it.

The chances of your having a fire are pretty small, but why put all your money at risk when you can have a free insurance policy? 


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