Risk management is sometimes considered the step child of personal finance because it often takes a back seat to Investments. Proper Insurance should be equally weighted with Asset Management practices.
Executives crazed by today’s madness of complexity and confusion in their business lives should not take their eyes off the ball with their personal risk management. Sometimes the two worlds of personal and business risk management can collide during corporate travel or nonprofit boards. The good news with insurance is once you are set up with a good insurance broker or agent and an affluent home and auto carrier, likely you be able to just pay your bills and rarely need to make many significant changes. However getting this all set up once, may take some heavy lifting.
Personal Injury is a specific type of liability coverage that is not necessarily contained in most homeowner’s liability coverages. However, almost all home insurance policies now allow it to be added via an endorsement to their policy. Personal Injury broadens your coverage to typically include “libel, slander, and defamation”among other possible coverages. For an exceedingly low cost, consumers may be able to protect themselves from claims arising from spoken and written words. In today’s world of online social media, this type of endorsement pulls a big value. Keep in mind that this coverage is for your personal life, not your business life. The liability that generate on the job is separate and should be covered as such.
There is a lot written on the internet about the need for umbrella policies. Much of it is far more complicated than need be. An Umbrella Policy is a fairly inexpensive way to increase your families’ liability coverage over and above what your home and auto and other personal lines of insurance can cover. Many home insurance policies today max out at $500,000 – and the general rule is to attempt to match your net worth with total liability coverage. Therefore, as an example if you have a net worth of 2,500,000 you may want to purchase a Two Million Dollar umbrella Policy over and above the $500,000 from your home policy. First seek out a quote from the home/auto provider and ask to see their Financial Strength Rating. If for some reason you question the home/auto insurer’s ability to pay out such a large claim it may be time to move your entire portfolio to an Affluent Carrier that specialises in higher exposures.
Simple Term Life Insurance
There really are few reasons, why wealthy executives with children would not want an inexpensive level term life insurance policy, for themselves AND their working or non-working spouse. Often consumers get lost in the competing types of life insurance: Universal, Variable, Whole, Term. In my mind, Term is the hands down winner until proven otherwise. Shoot for five to ten times earning and consider your current savings and future protected costs until your children are out of the house and through college. Shop around and ask about how your lifestyle, health class, and career affect your life rates. Be careful with agents that adamant that what you need is an overpriced complicated cash value life insurance policy which cost ten to fifteen times more than a competing term policy. Some of these agents will make astonishing claims about the possible use for these policies. If something seems to be too good to be true, it probably is.
Health technology has changed dramatically in the past fifty years, keeping people alive and possibly on life support now for much longer than was ever possible. It may be easier to understand loss of income from a deceased individual, than from an individual that is alive but not able to work anymore. Insuring against a potential loss of a lifetime of income is not cheap, but for many it is a complete necessity. Disability insurance is often included in your basic HR benefits. However it typically leaves lost of room for improvement. Fortunately many employers allow employees to buy up for additional coverages. Research this one with your human resources and consider buying as much as you can afford. If you own your own business and do not have the option from your job, you will want to hunt on theopen market for this. First contact your existing home/auto agent and even your life insurance agent.
You may find that a specialty disability broker may be your best bet. Worldwide Auto Coverage If you work or live abroad, it may seem obvious that you need to change your auto insurance. What may seem less obvious is the Executive that travels only occasionally for either personal or business. Worldwide auto insurance, typically only offered through a handful of insurance carriers, can be a real game changer. This auto insurance will assist you when renting cars abroad. Keep in mind that each country has their own rules and regulations about this that you will want to be mindful off. You will also want to read up (and ask) about auto coverages from your credit card companies. As a bonus make sure your auto coverage contains at least $500,000 in uninsured and underinsured motorist. Perhaps more if you can afford it. This coverage provides protection to you and your family, when someone else, for various reasons, fails to provide insurance coverage. This protection typically works in conjunction with your health insurance.
Proper Business Coverage
If you work for a typical American corporation this may be handled for you. However, it is always suggested that you have a discussion with consul and or Human Resources about what type of insurance the company holds for you and how you may be personally be exposed. Keep in mind that even the most successful career minded individual can be fired over the drop of a hat and possibly much of your insurance coverage may go with it. For owners of startups, especially wealthier individuals that own startups: You need to procure proper liability coverage and possibility other forms of insurance, such as Errors and Omissions insurance. In the beginning stages this can easily be the biggest yearly expense that you have. Business insurance, though is not just limited to your full time job, it may be needed for any boards that you sit on. Similar to your work situation, you are going to want to speak with the Chief Consul about what coverages are provided. If none are provided, this may sway your decision to accept the role. Look at it this way, if the collective net worth of the entire company and employee is $1.2 MM and your net worth is $7MM – whom do you think the opposing lawyers are going to target? If it’s a non-profit board you sit on, this can get deep into the insurance weeds. Speak with your home and auto insurance agent to assist you in identifying the best risk management practices with non-profits.
Is that all that an Executive Needs?
Will the discussion with a Quality Insurance Agent end with that? Probably not, but these six insurance ideas are really just a primer to get you and your risk management professional speaking. Keep in mind that not all risk management involves buying insurance. I would be remiss in not mentioning that rarely has anyone ever been sued for keeping their opinions to their self. Occasionally the best risk management strategy is to seek to avoid catastrophic law suits and property destruction. That may involve spending tens of thousands of dollars to retrofit your home for a potential flood or earthquake. Usually it will mean procuring a monitored fire and burglar alarm for your home. Almost always it means avoiding small insurance claims for the wealthy. The good news on the risk management front is that once many of these items are fully discussed you likely will not need to revisit them again for a long time. Scott W Johnson is the owner of WholeVsTermLifeInsurance.com a division of Marindependent Insurance Services LLC. Johnson believes in detailed insurance reviews to assist his clients in protecting their future. Mr. Johnson lives in Marin County California with his wife and two children.