When it comes to financial investments, we keep a constant eye on how they’re growing. That’s the reason we have them in the first place. For physical possessions, on the other hand, we may not consider the value they can accrue over time. While we purchase insurance for many things these days, it’s important to also consider the value our belongings may have — not just physically, but also digitally.
Much of what we value is covered by insurance: Our lives, health, homes and vehicles. But not everything of value is insured, and that’s where we need to pause and consider how vulnerable our financial situation may actually be. Insurance provides a way to manage risk of loss.
In today’s society, there are many things we own — both tangible and intangible — that are either uninsured or underinsured. Looking forward to the rest of 2017 and beyond, consider the following emerging risks and solutions to help protect your financial future and promote peace of mind.
Internet of Things
This year may well bring the industry-coined phrased “Internet of Things” (IoT) into America’s mainstream mindset. The IoT includes any computing device that connects wirelessly to a network and has the ability to transmit data. Presently, there are more than 6 billion cloud-connected devices in use all over the world. And we’re just getting started. Within the next three years, that number is expected to more than triple.1
The IoT includes modern-day conveniences such as:(2)
- Security systems, including alarms, Wi-Fi cameras and nursery video monitors
- Medical devices, such as wireless heart monitors or insulin dispensers
- Self-monitoring home appliances like washing machines, refrigerators and smoke alarms
- Smart appliances like smart refrigerators and television sets
- Wireless personal assistants like Google Home and Amazon Echo
- Wearables like Apple Watch and Fitbit
- Printers, personal computers, tablets and smartphones
- Entertainment devices that control music or television
- Car technology that is connected to a wireless home network
- Fuel monitoring systems
The problem with this “technology ecosystem” is that each device is a door to your personal and financial data. Recent statistics reveal that up to 70 percent of IoT devices are vulnerable to security hacks. Furthermore, since many devices have the capability to link together to share data, a hacker needs only to breach the security of one device to access data stored by others.3
Personal Data Security
While the dangers are real, the average consumer has to wonder why anyone would target his or her private devices for data theft. One answer is that you may not be the only target. Cyber thieves shotgun their targets with phishing emails that contain a corrupted attachment or link that exposes the user to malicious adware capable of invading his or her home network system.
The target is basically anyone who opens the attachment or clicks on the link. Once this happens, your network files can become encrypted, which could prevent you from accessing your own data and, worse, could open your photos, financial records and other sensitive information to cyber thieves.
Some hackers actually demand ransom money for access to be returned to the owner: Either pay to unencrypt the data or be locked out of your computer system (and other linked devices) permanently. Most ransomware attacks request payment in the digital currency bitcoin, even providing a link for users to learn how to pay in this manner.
Victims of cyber extortion can choose either to pay the ransom, which is often a small amount (remember, the phish email may be mailed to scads of victims, so the hacker’s reward is cumulative), or pay someone to rebuild your computer system.4
There are several defenses recommended to help combat data theft. For example:
- Don’t click on emailed links or attachments that are unfamiliar to you
- Create a password that contains a range of upper and lowercase letters, symbols and numbers for each device
- Do not use the same password on multiple devices
- Regularly back up files in the cloud or at a separate offsite location
- Change default passwords for your router’s administration features and Wi-Fi network
- You may wish to consult with an insurance agent about coverage designed to protect you from the negative impact of identity theft or a breach of your financial accounts.
On the other hand, you don’t want to place such an emphasis on cyber security that you overlook the vulnerability of physical possessions to theft. While many people take reasonable precautions to protect their home, ranging from deadbolt locks to third-party security systems, it’s important to periodically review insurance coverage in the event you are burglarized or suffer damage to your property.
The reality is that today, many homes are underinsured. With the rising popularity of Home & Garden Television, the third most-watched cable network in 2016,5 homeowners have taken to renovating, remodeling, adding on and fixing up their homes in lieu of “buying up” to a more expensive home. While every little design detail in home improvement may be addressed, homeowners may forget to update their homeowner’s insurance policy. For starters, extra square footage in the form of a master suite or family room addition makes your home worth more, and cost more to replace. Read your policy and/or check in with your insurance company or agent to confirm your insurance covers your home’s current replacement or “rebuild” value in present day dollars, which could cost more than the policy’s stated coverage limit.
While you’re at it, don’t forget to update coverage for the contents of your home, which are likely to have increased since you bought the policy. If you have expensive tastes, make sure your policy covers your more valuable possessions. In just the past 10 years, art investing by high-net-worth individuals has grown by 226 percent.6 Even if you added artwork to your insurance coverage when originally purchased, your pieces may have grown in value since then.
It’s a good idea to have artwork reappraised periodically to update your insurance coverage. Not just fine art, but investments in jewelry, antiques, expensive spirits, collections (e.g., vinyl LPs, comic books, trading cards), first-edition books, musical instruments and classic cars, to name a few.
Intangible Risks …
“From our reliance on connected technologies to overlooking alternative asset exposures, 2017 will test how well high-net-worth individuals are prepared to handle new and emerging property and casualty-related risks.”(7)
We work hard to provide both tangible and intangible goods and services for ourselves and our loved ones. Think about the way the world has changed in the past 20 years and the things that you rely on every day to make life easier. It’s important to prevent those possessions from possible risks as well.