How to Guard Your HNW Clients From Others

Your clients may have more than adequate insurance; many others do not. Steps you should take

Summer is in full gear and many of us are spending more time on the road to weekend getaways.  Kids are enjoying a cool dip at a friend’s home with a backyard swimming pool, or a good romp on their trampoline.  It’s a time to enjoy.

But it’s also a time to be aware. 

As you and your clients drive to the beach or a lakeside retreat, look at the traffic around you and consider that one in seven drivers has no insurance.  That’s the latest nationwide statistic from the Insurance Research Council.  In some states the ratio can be one in four drivers.  Many more may carry only the minimum levels of liability insurance required by the state.  If your family or a client’s family is seriously injured as a result of an accident caused by one of these uninsured or underinsured drivers, there would be little chance of recovering expenses for medical care that could run into the millions of dollars.  The driver at fault is unlikely to have substantial assets you could pursue in a lawsuit. 

A few states have no-fault auto insurance laws that can protect the innocent party in such cases.  Health insurance will help with the costs, but lifetime payout limits and co-pay percentages can still impose a significant financial burden.  Also, health insurance will not provide compensation for lost income, which can be significant for high-net-worth families, pain and suffering, and the cost of making a home handicap-accessible.

Being left on the hook when someone else lacks adequate insurance is not limited to automobiles.  Consider a child’s back flip gone awry at a neighbor’s pool, resulting in a serious neck or head injury and possible paralysis. Most homeowners have no more than $300,000 to $500,000 in liability coverage. That may not be enough in the case of a serious injury.  In one real-life incident, an entire deck collapsed under the weight of too many people during a party at a hillside home. The cost of treating multiple serious injuries quickly overwhelmed the overall liability limit in the host’s policy. 

These cases illustrate the truism that life is not always fair. You and your clients may be a very responsible and carry sufficient insurance to compensate others if you are deemed responsible for their injuries, even in extreme circumstances. But there is no guarantee that others have done the same. You can suffer as a result. 

The Risk Management Solution

As an indication of the prevalence of this threat, a study conducted by ACE Private Risk Services found that 82% of independent insurance agents said HNW consumers are likely inadequately protected against uninsured or underinsured individuals.

The solution is to purchase additional uninsured/underinsured liability coverage as part of an umbrella policy from carriers who specialize in serving HNW clients. Coverage typically starts at $1 million for as little as $100 in annual premium, with options up to $10 million. Considering the example of the deck collapse, clients should check that coverage is not limited to vehicular accidents.  Another benefit of this coverage is its worldwide reach. The uninsured/underinsured motorist coverages contained in an auto policy typically stops outside of the U.S., its territories and possessions, Puerto Rico and Canada.  If you and your clients like to travel abroad, the uninsured/underinsured option in an umbrella policy can fill the gap in coverage.

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