Guest Column

Steve Rosansky, President & CEO

Newport Beach Chamber of Commerce

Protect Your Assets

The recent failure of Silicon Valley Bank (SVB) and Signature Bank has prompted me to review all my assets to ensure that they are as protected as can be. If you haven’t been watching the news (you’re probably not reading this column either), a couple of weeks ago, both SVB and Signature Bank experienced a run on their deposits when word started spreading that they were experiencing significant losses on their asset portfolios. 

Banks don’t have all their depositors’ money readily available as they use the deposits to make loans for things like real estate, cars, equipment, working capital and credit cards. Or they invest the money in things like treasury securities. 

The good thing is that the FDIC insures depositors up to $250,000 against a bank’s failure. The bad thing is that if you have more than $250,000 in accounts at the same bank, the excess may not be insured and depositors with high balances can lose everything above that amount.

In the case of both SVB and Signature Bank, the majority of the deposits were held in accounts well in excess of $250,000 and those depositors could have been out of luck, but for the announcement by Secretary of the Treasury Janet Yellen that all funds on deposit, whether or not they were more than $250,000, would be insured. In some cases, there were companies with tens to hundreds of millions of dollars in jeopardy.

Disaster averted!

While it might be difficult and inefficient for many companies, with large sums of cash for working capital or payroll, to spread out their funds on deposit over enough banks to avoid exceeding $250,000 per account, for most individuals, this may be a wise practice since the government might not bail out the next bank and Janet Yellen so much as said so. Of course, you should always check with your trusted financial advisers for your particular situation.

Other types of assets should also be periodically reviewed to make sure they are as well protected as can be. Perhaps the biggest asset most people will own is their home. If you haven’t talked with your insurance agent in several years, it is time to review policy limits and coverages. Are you insured enough for liability in the event that someone is injured on your property? Construction costs have been skyrocketing lately. Have you been upping the replacement cost coverage? Does your homeowner insurance cover you adequately for theft? 

A friend of mine recently experienced a home invasion and hundreds of thousands of dollars’ worth of jewelry and handbags were taken. Make sure you have receipts and a good inventory and that you have purchased enough coverage to be reimbursed. Better yet, store them in a safety deposit box and retrieve them when you need them.

The recent rains and potential for flooding, as well as the ever-present danger of an earthquake, should lead you to evaluate whether you are protected from these disasters which typically require separate policies. Newport Beach has experienced King tides that have flooded streets and homes in recent years and many areas of Newport are built on soil with the potential for liquefaction in an earthquake.   

If you have very little equity in your property, perhaps the cost of coverage outweighs the benefit. However, if your property has experienced a significant run up in value, your equity in the property will be high and being able to repair or replace it will be critical in preserving your net worth.

Another key asset class to protect are vehicles. California law only requires a minimum of $15,000/$30,000/$15,000 coverage for injury and property damage. All but opening your car door into the car parked next to it will result in claims well in excess of these amounts (and if you door ding a Lamborghini, you still might have to come out of pocket). Talk to your insurance agent and explore coverage limits that are realistic when compared to the risks out there. You’ll be surprised that additional coverage may not cost much more.

At the end of the day, an ounce of prevention is worth a pound of cure!