Recently we completed some research with wealthy investors regarding their excess liability coverage. It was interesting, though not surprising, that many of these affluent households do not have adequate excess liability coverage.
I have to admit, even though I am a lawyer by training, I never really paid much attention to my insurance policies and what was included and what wasn’t really covered. This was particularly true of my homeowner’s insurance and any related policies. We didn’t live on a flood plain, no hurricanes in the Midwest…so I just presumed that I had everything I needed.
But then a terrible event occurred which shook my family to the core. My son, an affable and fun young man, was involved in a horrible accident the week before he was to go to college. In the middle of a sunny day, he was making a right hand turn on a red light, in an intersection where that was allowed. He was watching the traffic coming from the left. As he turned, a bicyclist on the path that ran parallel to the road on which he was turning, gunned to make the light and hit the middle of my son’s car as he was turning and was thrown under the car and crushed.
No words can describe the impact on my son. Fortunately the bicyclist, a lawyer by occupation, survived after spending some time in the hospital. Although no tickets were issued, the bicyclist brought a lawsuit against our insurance company for the exact amount of our excess liability coverage. The excess liability coverage I wasn’t even aware of! Thank goodness we had it! Because our son was a teenager, the insurance company decided just to settle for that amount. Thus, all of the financial fears just went away. The emotional part will never disappear.
So my words of wisdom? MAKE SURE YOUR CLIENTS ARE ADEQUATELY INSURED AND HAVE EXCESS LIABILITY INSURANCE. THIS COULD HAPPEN TO ANY FAMILY!!
Spectrem’s research showed that two-thirds of investors with a net worth of $15 million-$25 million have excess liability coverage of $5 million or less. That gap in coverage levels could result in a catastrophic loss. Over half of investors with a net worth of between $5 million and $7.49 million have excess liability coverage of $2 million or less.
You can learn more about the property and casualty and excess liability coverage of affluent households in our whitepaper, The Insurance Gap—Why the Wealthy are Underinsured.
Understanding your insurance coverage is important. Many investors simply rely upon their insurance agent to make sure they are adequately protected. Don’t be afraid to talk to your clients about this issue. Although many will buy this type of insurance on their own or through an insurance agent specializing in this coverage, it’s important, as part of their overall financial picture, to make sure they are paying attention to this important component of their portfolio.