A Deep Dive Into Why High-Net-Worth Individuals Need Insurance
No one wants to deal with insurance, right? Well, that’s why I have dedicated my career to providing trusted insurance advice to successful families and individuals. . There seems to be a question that persists: “What is high-net-worth insurance?”
According to Investopedia, high-net-worth individual(s) can be defined as any person or family with liquid assets above a certain figure – most commonly over $1,000,000. You may be thinking that you fall into this category, but don’t see the need to waste your time with insurance. In fact, the catchy insurance mascot on TV tells you you’re covered, so you are, right? Well, not so fast. Here are five common reasons beyond your net worth and assets that demonstrate why you should consider working with an insurance advisor that specializes in high-net-worth insurance coverage.
- You serve on at least one non-profit board
- You own multiple homes
- You have a large guest house or own expensive vehicles such as Teslas or Bentleys
- You have teenagers who love social media
- You have domestic employees, especially if you employ them personally
A Deep Dive Into Why High-Net-Worth Individuals Need Insurance
You serve on at least one non-profit board
Many people are unaware that they could be held personally liable for their actions on a non-profit board. While their actions may be noble and their intentions may be honorable, errors and omissions, misleading statements, or breach of your duty could land you in court.
Many board members are not directly aware of what these organization provide coverage for and automatically assume that they are fully covered. You can easily minimize your risk by purchasing an add-on coverage for your umbrella policy for non-profit directors and officers (D&O) coverage.
What’s the problem though? Many mainstream insurers with the catchy insurance mascots don’t provide that add-on coverage. Starting at around $250 a year for $1M in coverage, personal D&O insurance coverage is important AND inexpensive.
You own multiple homes
Whether you own homes in one state or in multiple locations, it is incredibly important to work with an insurance advisor who can review all of your assets and make coverage recommendations on a holistic basis. When you go to multiple doctors, it typically helps minimize frustration and increase communication when your doctors are in the same hospital system, right? Well, on a simplistic scale, high-net-worth insurance is the same.
Here’s a scenario: You have a home in Ohio and a home in coastal Florida. Let’s say you hold a private event at your Florida home with many friends, families, and colleagues. A friend-of-a-friend had too much to drink when leaving your home. They get in an accident and injure a family in another vehicle. Your Florida home carries $100,000 liability with one insurer and your Ohio home carries $500,000 liability with another insurer. You also have a $1M umbrella with your Ohio insurer. If a lawsuit alleges that you were negligent, that $100,000 liability coverage could be easily exhausted. However, you have an umbrella policy of $1M, so you are okay, right? Not so fast.
Umbrellas typically require a minimum liability limit for all underlying policies. If your Florida home does not meet that limit OR is not listed because it is with two different carriers and two different agents, you could be stuck paying out of pocket.
Furthermore, not only can you maximize discounts with having all of your coverage with the same insurance carrier, you can also get special benefits. If your home in Florida is in a high-risk area, many carriers may steer away from providing coverage, but if you have corresponding coverage and corresponding insurance premiums in a lower risk state like Ohio, an insurance advisor could have more flexibility to get coverage for your Florida home when they have a complete picture of your risks.
You have a large guest house or expensive vehicles such as a Tesla or Bentley
If you have a large guest house on your home and you see the other structures coverage on your insurance policy, you may think you have coverage.
Did you know that a pool house may need special coverage? Did you know that any fences or special features around your pool may also be considered other structures coverage? Standard carriers typically only provide a small amount of coverage for all of the detached structures on your property. On top of that, they may not have the flexibility to increase that coverage to adequately cover those structures.
Here’s another example. If you think your auto coverage is the same and you don’t need an advisor in high-net-worth insurance to cover that risk, think again. Mainstream insurance carriers depreciate for physical damage of your high-valued cars after a loss. Full coverage does not mean fully covered.
Premier insurers that specialize in high-net-worth insurance provide agreed value coverage for your cars that also includes original equipment manufacturer (OEM) parts. Do you want your Bentley or Mercedes to be cobbled together with after-market car parts when involved in a fender bender? That could not only impact the future resale value of your vehicle, but also greatly impact the safety and technology features of your car, too.
You have teenagers who love social media
Whether you love or hate social media, it is a mainstay in our daily lives. Teenagers are often on the cutting edge of social media and commonly use it to communicate with friends. Gone are the days of tying up your parents’ phone line for hours talking with friends. The exponential increase in time spent with social media and screen time in general often leaves unsuspecting family members at a higher risk for cyber bullying, cyber-attack, extortion, and elevated security risks.
Families with more assets are also targets for lawsuits, hacks, and more. Typical homeowner’s insurance does not cover cyber related losses, or severely limits this coverage. High-net-worth insurance with premier insurance carriers can provide personal cyber coverage. This can help protect you and your family from reputational damage and financial loss in the future.
You have domestic employees, especially if you employ them personally
If you have domestic staff and don’t work with a high-net-worth insurance advisor, please consider reaching out to our trusted high-net-worth insurance advisors at Sterling Coverage. A common insurance gap in standard insurance policies is surrounding domestic employees. What happens if you terminate your maid due to poor performance and they turn around and sue you for wrongful termination? If you do not have employment practices liability coverage and high excess liability limits, you will be paying for your legal costs and any related judgments out of your own pocket.
In summary, you know that a home valued at $250,000 is not the same as a home valued at $1.5M or $5M. You know that a $20,000 car is not the same as a $90,000 car, so why are you insured with the agencies who specialize in insuring homes valued at $250,000 and vehicles valued at $20,000? A comprehensive insurance program crafted by an agent that specializes in high-net-worth coverage can help you appropriately insure your assets and perpetuate your wealth for generations to come. Don’t fall victim to the idea that all insurance is the same.