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October 19, 2012 at 06:26 AM
The tendency of wealthy individuals and families approaching or in retirement to keep personal insurance policies largely untouched for years on end exposes them to the threat of lifestyle-changing losses and unnecessarily high annual expenses, according to ACE Private Risk Services.
A white paper released this week by ACE Group’s high-net-worth personal insurance business says that the most serious threats to retirees’ or near-retirees’ net worth come from exposure to big liability lawsuits and significant property loss at home. As well, many people overlook savings opportunities in their personal insurance plans.
The paper includes a guide to build and maintain a personal insurance plan into retirement.
“Financially successful couples and individuals in or near retirement face some of the most complex decisions about insurance at any time in their lives,” Robert Courtemanche, division president of ACE Private Risk Services, said in a statement.
“Retirees and pre-retirees should craft a personal insurance program with sufficient umbrella liability coverage to match their at-risk assets, ensure their home is covered to its full replacement cost instead of its market value, as well as seek savings through higher deductibles and bundled insurance policies.”
The white paper’s 13 recommendations for wealth protection and strategic expense management in retirement planning:
1. Purchase umbrella liability insurance to match at-risk assets.
Wealth tends to attract lawsuits. A jury award or settlement in a case involving an accident that resulted in serious injury could approach tens of millions of dollars. ACE research has found that more than 40% of wealthy households have less than $5 million in umbrella liability coverage, including 21% that have none at all.
2. Seek full replacement cost coverage for your home.
Most homes in the U.S.—a significant, if not the largest, component of net worth for people near retirement—are underinsured. The best insurance policies will provide full replacement cost coverage for the home structure, including rebuilding with similar quality materials, even if that cost exceeds the coverage limit in their policy.
3. Increase homeowner and auto deductibles.
Increasing these deductibles can save hundreds, even thousands, of dollars per year in insurance premiums. An increased deductible on a million-dollar home from $500 to $2,500 could save $900 a year, according to ACE.
4. Name trusts and limited liability companies on insurance policies.
Wealthy families and their advisors must remember to name trusts and LLCs—set up to shield homes, valuable collections and financial assets and maximize wealth transfer—on the appropriate insurance policies, or risk leaving themselves or the trust unprotected against liability lawsuits.
5. Attend to liability risks from hobbies turned into small businesses.
Turning a longtime hobby, such as a vineyard, farm or horse stable, into a small business can create substantial liability risks.
7. Take inventory of home contents and make sure the coverage limit for personal property matches its replacement cost. 
9. Use the added protection of a valuables policy for jewelry, art and wine collections. 
11. Get credits for loss prevention systems and upgraded plumbing, electrical and heating systems. 
13. Insure classic cars with a classic car policy, not a standard auto policy. 