Feb 5, 2016

Are you using mass-market insurance to protect your net worth?

Some people flourish. They own multiple homes, enjoy the lifestyle that success can bring, and perhaps they even attract media attention. With expanding success, their financial planning evolves, too. They graduate from savings accounts to 401(k)s, and eventually they work with superb investment advisors who can manage the complexity and scale of their planning needs.

Yet their insurance often trails behind their prosperity. Time and again, we see even very successful clients clinging to policies they purchased right after college. Unfortunately, such threadbare coverage often leaves high net worth individuals and families dreadfully exposed. G2 excels at helping successful families and individuals handle risk more astutely.

Our deep roster of risk management experts really understand how to craft the most suitable limits and coverages. Using a highly consultative approach, emphasizing personal service, we can guide you to significantly better risk management. We know that today’s risk landscape is more complex and involved than ever before. Risks are everywhere and are often intertwined.

Professional visibility has its dangers, for example. We’ve often seen clients who have the great fortune of going through a major liquidity event such as an IPO, yet their insurance and risk management program fails to evolve to meet their new risk profile. Their newfound success, combined with the visibility that the modern world enables, makes for a heightened risk profile.

Your lifestyle is another source of risk. We visit clients’ homes as part of our risk management process, and often spot features on the property that may raise unexpected underwriting or safety issues. Swimming pools, trampolines, half-pipes, jet skis and even children are all factors that need to be considered when designing a comprehensive insurance program for clients.

Homeowners insurance policies themselves can vary dramatically, especially where luxury homes are involved. If you have a severe loss, a mass market carrier may pay only a portion of what it ultimately costs to repair the damage. By contrast, a policy designed by a high net worth carrier often features loss provisions that allow replacement with the same fine quality and craftsmanship that was originally in the home.

Similarly, a collections policy from a high net worth insurance carrier typically offers broader coverage and payment terms for your valuable art and jewelry. Your treasured possessions are unique, so you need more than generic mass-market insurance. Umbrella coverage with a mass market carrier is also a concern as such carriers tend to provide lower liability amounts of coverage, which can leave you exposed as the trend in jury awards continues to increase.

Other risks involve complex estate mechanisms. Successful families who own multiple properties often place them all in carefully devised limited liability corporations, or LLCs. We’ve seen families create multi-property, multi-state portfolios of homes, and then fail to name the LLCs in their policies, which can jeopardize their coverage. That is something we at G2 address continually.

Conclusion: We live in an era where a successful individual’s insurance and risk management approach needs to be as sophisticated and customized as their wealth advisement and capital management.

Even the most sophisticated high net worth individuals may not really understand their personal insurance program.

This creates a situation where the majority of high net worth individuals and families are woefully under-protected by their programs, leaving them exposed to substantial risk of wealth destruction.

At G2, we believe that the best solution for successful individuals and families lies in a consultative, custom-tailored approach for their risk management and insurance.

This article was originally published in the February/March 2016 issue of Worth.


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