Advanced Insurance Strategies for Affluent Families
At some point in life, almost everyone obtains the same type of insurance—health, homeowners, auto, and perhaps life insurance as well. But did you know that as someone who’s accumulated (or is set to accumulate) a significant amount of wealth, your insurance needs look a little different? While you may need to maintain some of the same standard policies as everyone else, there are some additional policies to consider.
Let’s take a look at a few special policies designed to protect the financial well-being of affluent families and high-net-worth individuals.
Umbrella Insurance
A type of personal insurance coverage, umbrella insurance can essentially pick up where your home or auto policies leave off. It serves as a form of liability insurance, which can be especially helpful in the event you’re sued for damages or injury.
In order to obtain an umbrella policy, you’ll need to have a homeowners, auto, and/or boat policy already in place—depending on what you intend on covering.
It’s typically most appropriate for people with a sizable estate or those who own items considered to be hazardous (trampolines, pools, and certain dog breeds, for example).
Professional Liability Coverage
Depending on your profession, you or your employer may need to obtain a professional liability policy to protect against lawsuits (such as medical malpractice or negligence). Professionals who commonly carry these policies include doctors, architects, real estate agents, financial advisors, and insurance agents.
The wording of these policies can be especially complex and nuanced. You may want to speak with your lawyer or members of your professional organization to determine which policy and provider is right for you.
Although it falls under a slightly different category, consider also obtaining a directors and officers (D&O) liability insurance policy if you serve as a board member for any organization—non-profit, unpaid volunteer, or otherwise.
High-Value Home Insurance
Traditional homeowners insurance policies are designed to provide comprehensive coverage for the average homebuyer. If you own properties that are especially valuable, luxurious, or include custom and unique features, a high-value home insurance policy may be more suitable. These policies will provide the same comprehensive coverage of the property (including garages, pools, sheds, etc.), but typically with limits extending beyond normal replacement costs.
High-value home policies also tend to offer better coverage for the homeowner’s actual possessions, which can help cover the cost of expensive art, jewelry, antiques, and other valuables.
Life Insurance
While your family may not need the money from a life insurance policy to continue supporting their financial obligations and lifestyle after your death, some high-net-worth individuals find it useful in some estate planning scenarios.
If your assets are primarily tied up in a business or investments, for example, a life insurance death benefit can offer your loved ones relatively fast access to a substantial amount of cash—which they can use to help cover any lingering debts or costs from the estate or other immediate financial needs.
Your estate may exceed state or federal estate tax exemption limits, which means a portion of it could be subject to substantial estate or inheritance tax. A death benefit from a life insurance policy could help your heirs cover the tax liability of your estate (which can be as high as 40%).
For business owners, life insurance policies may be used to protect the company’s financial integrity as well. If one partner of the business dies, the surviving one may use the death benefit to buy out the deceased partner’s shares, for example.
Bank Accounts
While you don’t need to purchase a policy to protect your accounts, it’s still good to know your checking and savings accounts may be covered. The Federal Deposit Insurance Corporation (FDIC) insures bank accounts up to $250,000.(1) The limit is per bank, per depositor (meaning you), and per “ownership category” which can include an individual account, joint account, “payable on death” account, and other similar types of accounts.
This insurance coverage is designed to protect your deposits that live within checking, savings, certificates of deposit, and money market accounts at an FDIC-insured bank. It does not, however, cover investments, cryptocurrency, life insurance policies, or safety deposit boxes.
If your accounts exceed the $250,000 coverage maximum, talk to your advisor about potentially rearranging assets to ensure all accounts are fully insured.
Need Help Reviewing Your Protection Plan?
Insurance policies come in many forms, and they each can play an integral role in protecting your financial well-being. As someone who’s accumulated a significant amount of assets, your protection plan should be reflective of your unique and complex estate—meaning it’ll likely look different than the average individual’s needs.
If you’d like to review your current coverage and identify potential gaps, feel free to contact me.
Sources:
Rob Edwards is a Managing Director and Senior PIM® Portfolio Manager at Edwards Asset Management. Rob is a nationally recognized advisor who helps millionaire families navigate the complexities of their wealth. The firm has offices in Naples and Fort Lauderdale, Florida.
Wells Fargo Advisors Financial Network does not provide legal or tax advice. Be sure to consult your own tax advisor and investment professional before taking any action that may involve tax consequences.
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Edwards Asset Management is a separate entity from WFAFN.
