Decoded For The Rich, Insurance Needs Of The Super-Wealthy

The rich and famous require special treatment, more so, when it is a question of insurance. Mass-market insurance policies may be perfect for you or me but not for the millionaire in a luxury tower in Manhattan. He has more to worry about than you or I, from art collections to house staff and the dangers of owning a luxury yacht. Yet, many members of the affluent community remain clueless about their rich insurance needs. As a result, many go with insurance policies for the masses, forgetting that their needs require different treatment. Underinsurance is thus the bane of the affluent classes.

Patti Clement, VP and MD of HUB Private Client Advisors, a consulting firm for high net worth individuals reveals that 90 to 95 percent of the clients she deals with have insufficient rich insurance. Many, who choose the regular wealth insurance plans tend to overinsure in the area of minor threats but underinsure in the more risky ones.

A famous case is that of wrestler and reality TV star Hulk Hogan. Hogan realized the extent of his underinsurance when his teenaged son crashed a car while street racing, leading to a brain injury for his friend in the passenger seat. Hogan’s auto policy covered only $250,000. How was he to deal with a lawsuit from the parents’ of his injured son’s friends? A $30 million fortune does not go far with a lawsuit in the background. Hogan eventually settled out-of-court with the family, then took his wealth insurance guys to court for not upgrading his policy.

Perhaps Hogan might have been spared all the hassle had he signed up with insurers who deal with high net worth individuals. Firms like ACE, Chartis, Chubb, Fireman’s Fund and Privilege Underwriters Reciprocal Exchange are well versed in rich insurance needs of the wealthy.

For instance, a tycoon who owns a luxury yacht could face several big risks. There is the political risk of straying into the territory of a different nation. There is the risk of pirates at sea. There is the crew that must be paid. And there are always the inherent natural risks of life at sea.

Then look at the auto insurance space. For most people, an auto policy that covers repairs is good enough. But not for a super-rich guy with a Bugatti. If a luxury car is exorbitantly priced, you need special coverage. And there is always the liability issue. The more liability coverage one has in such cases, the better.

Then again, wealthy people have fine arts collections, racehorses, a bar filled with rare and expensive wines, and so on. Each of these requires specialized coverage. There is little point in insuring a $5 million painting for $50,000. A basic homeowners’ policy will not protect your painting against damage. And what if someone makes off with the painting?

Plus, if you happen to be super-rich, you have to constantly beware of scheming staff members who are simply waiting for the opportunity to slap a sexual harassment (or other) lawsuit on you. Coverage against scheming employees is also a must.

Finally, of course, there is life insurance. For this, you will have to head to your regular insurer. But don’t give this a miss. If nothing else, it will save you a lot in taxes.

Via: Fox Business

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