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May 1, 2017

Personal insurance risk management for entrepreneurs and executives

When a personal risk management program is weak, the consequences can jeopardize not only your wealth but also the lifestyle to which you have become accustomed.

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For many entrepreneurs and corporate executives, wealth grows over time as a result of climbing the ladder of success.  However, with each promotion, your family’s lifestyle may change and become more luxurious. With your increased financial success, you might choose to hire a new financial advisor, CPA, and add an estate attorney to your wealth advisory team.  Unfortunately, the importance of specialized personal risk insurance may sometimes be overlooked.  It’s important to keep in mind that protecting the wealth you have painstakingly earned is just as important as building it.

As an entrepreneur or executive, you have unique personal risk exposures and are more publicly visible, which means you have more at stake. Are you aware that high-net-worth insurance brokers and insurers are available to provide the broad coverage you require and the levels of service you expect? 

If your personal risk management program is weak, the consequences can jeopardize not only your wealth but also the lifestyle to which you have become accustomed. By completing a thorough needs analysis, a comprehensive risk management strategy can be tailored to your specific needs and developed to transfer risk through insurance. Here are the top 12 vulnerabilities of an entrepreneur’s or executive’s personal risk management program:

  1. No umbrella coverage or insufficient liability limits in place.

    What happens when an executive, who was childless when an umbrella policy was placed, now has a teen son who is involved in a fatal accident?

  2. Coverage is placed with an insurer that doesn’t have the features and benefits to meet the lifestyles and expectations of affluent families.

    How would a carrier whose average client owns a builder-grade home replace a custom home with marble direct from Italy? 

  3. Low liability limits on policies.

    If a business owner collides with the owner of a late-model Porsche valued at $125,000, is there adequate liability in place to cover the damages?

  4. Underinsured properties.

    What if a home has been renovated since the policy was originally written and the coverage was never amended?

  5. Omission of naming entities with ownership on property-related policies.

    Are LLCs, trusts, and other entities that own property afforded protection on related insurance policies?

  6.  Insignificant treatment of passion purchases.

    How will an extensive wine collection, valuable art, or sentimental jewelry be replaced or repaired in the event of loss?

  7. Lack of protection regarding employing domestic staff.

    What happens when the family is named in a lawsuit involving the housekeeper who falls from a ladder and is injured on the job or if the nanny is claiming harassment?

  8. Absence of individual non-profit directors and officers liability coverage.

    What if the shared limits under the board’s policy are inadequate?

  9. Insufficient social media liability education and protection.

    Is there coverage afforded for the executive’s daughter who has a YouTube channel and slanders a classmate?  Who is providing advice on social media pitfalls?

  10. No coordination among trusted advisors (insurance advisor, financial advisor, CPA, and estate attorney). Multiple insurance brokers for separate policies or policies in different states.  No communication between the advisor team.

    What happens if the vacation home where the executive’s wife entertains frequently has a different liability limit than the primary home in another state? Who is facilitating communications so that watercraft and recreational vehicles used at a vacation home are covered by an umbrella policy?

  11. Insurance is not updated when lifestyle changes occur.

    Does the overall program look the same as when the executive first received a leadership position?

  12. Absence of claims management advocacy and advice.

    Who knew that filing frequent small claims could impact premiums and even insurability?

In addition to addressing the vulnerabilities described above, a responsive personal risk management program designed for an entrepreneur or executive should also offer protection for the following additional scenarios:

  • Individuals in the household from liability exposures – You, your spouse, children, domestic workers (nannies, housekeepers, etc.)

  • Physical assets from loss — Primary and secondary homes, cars, recreational vehicles, watercraft, aviation, fine art, wine, jewelry, and other collections

  • Entities with ownership — LLCs, trusts, and estates

  • Ancillary and lifestyle issues — Participation on boards, frequent entertaining, social media activity, employment practices liability, and workers’ compensation for domestic workers

To help maintain adequate protection, it’s also important to communicate with your personal risk advisor during regular reviews and keep them updated on marriage status changes, newly licensed drivers, home renovations, liquidity events, and other lifestyle changes and factors. 

Working with a personal risk advisor to create a customized insurance program can eliminate gaps in coverage and provide lasting peace of mind, allowing you to focus on the continued success of your career as a business owner or corporate leader— with the security of knowing that you and your family are well protected from the unexpected.