What You Need to Know
- Basic auto or home insurance policies’ liability limits may not fully cover the high costs of an accident or lawsuit.
- Without proper insurance, those clients may be forced to liquidate investment assets to cover the excess.
- Your clients may have made lifestyle purchases during the pandemic, like a boat or motor home, that require additional insurance.
High-net-worth clients are especially at risk from an unexpected source: personal liability claims. In response, advisors can build trust with their clients by helping them understand and protect against catastrophic liability losses.
An unexpected event — such as a boat or car accident, a guest injury on your property or a high-dollar jury award — can reduce a client’s personal wealth in one fell swoop.
Excess Liability Coverage
Your clients may have basic auto or home insurance, but these policies’ liability limits may not fully cover the high costs of an accident or lawsuit. For example, a standard homeowners policy may provide $100,000 to $500,000 in liability protection, but this limit can easily fall short in some cases. When a client lacks appropriate levels of insurance, an unexpected event can require the liquidation of investment assets to cover a judgment or settlement, as well as legal costs.
Fortunately, a personal excess liability policy, also known as an umbrella policy, can provide additional coverage that protects your client’s wealth. Excess liability coverage will kick in for a covered event when the underlying limit of a home, auto, or other policy is exhausted.
But not all excess liability policies are the same. Make sure your client works with a carrier that offers high enough limits to protect their wealth. Also, clients and advisors should carefully consider how legal costs for covered events will be paid under the policy.