One’s assets usually dictate the proper financial limits of insurance protection. While this truism stands firm, there can be a tendency when assessing the risk-transfer needs of the wealthy to focus more on the amount of insurance than the actual insurance coverage.
Clearly, the limits of financial protection are vitally important, and in the case of those with considerable wealth, these limits can be substantial. But also critical is the right insurance coverage, which should be designed to specifically address the policyholder’s risk profile.
We are all dissimilar when it comes to our particular aesthetic tastes, personal passions and work-life structures. Some people enjoy highly public roles, entertaining guests at sumptuous parties, fundraisers, museum exhibitions and the like. Others may collect vintage automobiles, rare pieces of jewelry, paintings by the Old Masters or the latest works hanging on the walls of an art gallery. The risks that confront our personal assets in many ways depend on our personal appetites.
Celia Santana, president and CEO of Personal Risk Management Solutions, a New York-based insurance brokerage specializing in serving high-net-worth clients, recently recounted a story she had heard about an affluent family with a longtime nanny who had come to be regarded as a member of the family.
“As the nanny grew older and the children grew up, the nanny stayed on and altered her work regime, attending to household chores more than caring for the kids,” Celia recalled. “One day she was injured doing housework, and required expensive surgery. Her health insurance coverage did not cover the full costs, and she sued the family, which had not purchased a workers’ compensation insurance policy.”
Celia added, “The loss was sizable.”
The above scenario illustrates what can happen when an insurance agent or broker fails to fully discern the breadth of potential risks confronting policyholders. The assumption of the insured is that high insurance limits alone—buying the most insurance—will take care of all threats to personal wealth. Unfortunately, this is not always the case.