High Net Worth Insurance
High Net Worth insurance policies are, generally, focused on those homeowners whose properties are worth more than a million dollars. Typically, these clients face multiple risks connected to the properties they own, so their coverage usually includes inland marine insurance, a valuable articles policy in conjunction with their home, and access liability. Typically, high net worth positions include professionals like physicians or people who acquire wealth over the course of their lifetime.
WHY DO HIGH NET WORTH PEOPLE NEED SPECIAL INSURANCE?
Simply put; greater assets equal a greater liability risk.
Liability is the risk someone has to lose their assets in a lawsuit. For instance, someone with wealth in excess of a million dollars is more susceptible to being sued for a higher amount of insurance in the event of an accident. Liability insurance covers the policyholder if they are ever sued for their wealth.
YOU MIGHT BE HIGH NET WORTH AND NOT REALIZE IT
We actually run into this more often than not. Someone starts out with just an auto policy, because they don’t own a home. Then, over time, they acquire wealth and assets. Things add up quickly and, before they know it, their net worth is over $1 million, yet they are still purchasing insurance the same way they did when they bought that first auto policy.
At Schechner Lifson, we sit down with our clients every year to review everything that’s happening in their life—especially things that may have changed. Getting married, having children, buying a new home, starting a new business, all have a big impact on the level of your risk exposure. A good financial advisor will point you in the right direction, providing a plan for building a safety net for your wealth. The right insurance coverage makes you whole in the event the worst happens.
For example, there is a big difference between replacement cost coverage of your home, which is going to make you whole again in the event of a loss, and a market value coverage, which is as if you sold your home what it would sell for today.
Insurance carriers base replacement costs on the actual contractors rate for rebuilding your home. So, if your home was built in 1926 and has plaster walls, it’s going to take a specialist to come in and rebuild those walls and would cost more to do that, compared to a home built in 2005 using sheetrock or drywall.
REALIZING THE NEED FOR BETTER COVERAGE
You bought a home thirty years ago and when you did, you also bought an insurance policy. Year after year, you renew that policy, until one day you think to yourself, “Hey, I think I’m paying too much!” And that’s when we get a call.
When a Schechner Lifson advisor reviews the types of liability circumstances and different insurance options available, clients often realize their coverage isn’t sufficient for their current siuation.
Sometimes we use examples of our own life experiences and, many times, our clients are able to relate it to their own lives and say, “You know what, I think you’re right. Even though it may cost us more money, it makes sense to go with the better insurance.”
WARNING SIGNS OF BEING UNDERINSURED
- Going more than two years without a complete insurance review. Whether you consider yourself high net worth or not.
- Your home is currently valued at $750,000.00 or more.
- If you have a collection of artwork or precious metals, passed down through the generations. The rates of gold and the rates of platinum have gone up dramatically; you may not be aware of the value of their items.
- A child in your family is getting a driver’s license in the next year or two.
- Your financial planner advises you to protect certain assets.
- You don’t have a financial planner.
- If any of your assets are currently not protected
- If none of your assets are in a trust
Remember, an attorney can seek your future earnings if you are held liable in a motor vehicle accident, if somebody slips and falls outside of your apartment, or a party guest drinks in your home and then drives.
So, while you may be in an account management position now, in five years you may be promoted into a management position with a much larger salary. When attorneys go to court, these are the kind of things they are going to look at. Having a greater amount of liability coverage now will protect those future earnings.