This blog post can also be found on our Coronavirus Resource Center.
It’s no secret the markets are in turmoil as a result of COVID-19. Many investment portfolios have seen significant reductions in value, and some analysts are predicting more of the same.
As a high-net-worth individual, you’re facing new risks. What would happen if, on top of investment losses, you faced a property or liability claim that wasn’t covered by your insurance?
Now is possibly the worst time to be paying for losses out of pocket. Doing so could drastically impact future investment strategies, delay retirement, or result in financial ruin.
In today’s challenging world, the importance of a personal insurance review has never been more critical.
Majority of High-Net-Worth Individuals Are Incorrectly Insured
Many high-net-worth individuals believe they have adequate insurance coverage to protect their property and liability exposures; however, coverage gaps are common.
Unfortunately, most don’t understand the potential risks they face and how to mitigate it through insurance. In research commissioned by Chubb, 74% of high-net-worth individuals and families carried liability insurance, however many didn’t have the appropriate limits.
This could be financially devastating if faced with a lawsuit, potentially even more so now. According to the research,
“10% of financially successful families were forced to pay judgments of $100,000 or greater, and 3% experienced judgments greater than $1 million over the last ten years.”
More data from the study revealed:
- Only 23% of respondents had heard of employment liability insurance (for domestic staff) and just 6% had purchased the coverage if available. (This type of coverage is key due to risks presented during COVID-19.)
- Only 24% carried flood insurance.
- 62% lacked jewelry insurance entirely.
- 87% lacked any insurance to cover their artwork.
- 16% do not know the fair value of their personal possessions.
Not all coverage and insurance carriers are created equal. Working with a broker that is appointed with carriers like AIG, Chubb, Cincinnati, Nationwide Private Client, and PURE is the first step to being correctly insured as a high-net-worth individual.
Now Is the Time to Assess and Properly Insure Your Risks
With all the volatility in the stock market, you want to create some certainty in your overall investment portfolio. Right now, protecting your tangible assets and your personal liability exposures is one way to regain some control.
Here are three ways you can assess key insurance coverage:
1. Review your homeowner’s policy. For many, homes form a significant portion of their tangible asset portfolio. It’s not uncommon for a homeowner’s policies to have inadequate limits and incorrect coverage. Some things to consider:
- With building costs spiraling upwards, is your home insured for the current rebuild cost?
- Have you reviewed the valuable collections coverage on your homeowner’s policy? Does it provide adequate protection for fine art, jewelry, antiques, etc.?
- Should you consider wind, earthquake, or flood coverage?
- Does your policy have limitations when your home is unoccupied for extended periods of time?
2. Protect the titled owner of your assets. Are your trusts and LLCs noted as additional insureds on all relevant policies? If they are not listed correctly, the policy may not respond to a property or liability loss.
3. Review your liability policy. Now is the time to review limits so that you can protect your net worth from a large liability claim. If you employ domestic staff, have you considered employment practice liability insurance?
During a professional insurance review with a broker, you’d look at all those areas and more. A personal insurance review like those we provide our clients here at Woodruff Sawyer takes a deep dive into:
- Discovering what is most important to you, and how to protect your family, assets, liability, and lifestyle.
- Risk mitigation strategies and insurance product availability.
- Selecting an insurance carrier that best serves your needs.
- How to structure an insurance program that addresses all coverage and risk concerns.
Regardless of what stage you’re at in life, your income, or personal goals, a sound insurance plan can help protect your future. Regularly reviewing your coverage is vital to ensure that you don’t “outgrow” your carrier.
An insurance review followed by a well-implemented strategy can protect your family and give you peace of mind in these uncertain times.
For more information on a personal insurance review, reach out to your account manager or one of the authors of this post from Woodruff Sawyer’s Private Client group.