Most affluent families have failed to adjust their insurance programs to protect their assets. They choose their insurance agent and carrier early on in their wealth building years. Then, because few people like to think about insurance, they rarely take a close look at those choices again.
Often these families continue to place their home, auto, watercraft, valuable collections, and umbrella liability insurance with mass-market carriers that are not specifically structured to meet their needs—a problem that remains unnoticed until their house burns down or they get sued, maybe for millions of dollars.
That’s when they may have to call their wealth manager about liquidating a substantial portion of their investments because they are woefully underinsured. At the same time, they may have been ignoring easy savings opportunities, which could have funded better coverage.
Fortunately, wealth managers can, in most cases, quickly determineif their clients are likely over-paying and underinsuring by asking 10 simple questions that address the most likely areas of risk, according to a recent survey of 600 insurance advisors. If the client answers “no” to any of the questions listed below, wealth managers should refer them to an independent insurance agent or broker experienced in dealing with affluent families. The agent or broker will be able to systematically review their exposure to a wide array of risks as well assess their tolerance for risk. This comprehensive evaluation enables them to recommend a program that maximizes value—an ideal combination of custom-fit insurance protection and affordable price.
Determining If Your Client Is Exposed to Significant Risk
- Do you have umbrella liability coverage, and have you chosen a coverage amount that matches your net worth and future employment income stream?
- Will your homeowner’s policy pay to rebuild your home with similar quality materials and craftsmanship no matter how much it costs?
- If you recently expanded or upgraded your home, did you discuss it with your insurance agent?
- If you own a significant amount of artwork, oriental rugs, antiques, and other collectibles, have you insured them with a valuables policy and made sure to account for any change in their value from year to year?
- Do you have at least $1 million in uninsured/under-insured liability protection, and does it apply to more than vehicular accidents?
- If you employ household staff such as a nanny, caretaker, or chef, do you have employment practices liability insurance?
- If you serve as an unpaid board member for a not-for-profit organization, do you realize the organization’s insurance program may not fully protect you from liability lawsuits brought against it?
Determining If Your Client Is Missing Savings Opportunities