Newly Wealthy Often Overpay to Be Underinsured

And 50% of agents surveyed believed that families had overlooked credits available for safety systems such as burglar alarms, water leak detection and power backup systems, compared with 36% in 2010.

The surveyed revealed that more high-net-worth clients insured by mass-market carriers in 2012 were likely to be underinsured for various, often serious risks:

• 92% of agents reported inadequate liability coverage, even though 80% of families believed their wealth made them a target for a lawsuit (up from 89% in 2010)
• 86% said wealthy families had inadequate protection if they should suffer serious injury or damage at the hands of someone without the insurance or assets to meet liability obligations (82% in 2010)
• 86% reported ineffective coverage of valuable collections (83% in 2010)
• 83% believed families had insufficient coverage of the main home and/or vacation home, even as this often represented the largest component of a family’s net worth (86% in 2010).

As in the 2010 survey, more than a third of agents reported that clients likely had too much insurance for minor losses, other structures on their property, such as detached garages and swimming pools, and the personal property in their home.

About the same number said these areas were likely to be underinsured.

“Unless they have a severe loss, [wealthy individuals and families] never realize their agent and carrier no longer have the expertise, insurance coverages and services to fully meet their needs,” Robert Courtemanche, division president at ACE, said in a statement.

“But by then, it’s too late. Ironically, if they had looked for an agent and carrier better suited to their current level of achievement and lifestyle, they probably wouldn’t have had to pay much more for better protection. In many cases, they could have paid less.”