By Joel Zimmerman

How Insurance Needs Are Different for the Wealthy

Life insurance is necessary for everyone, but its importance spikes for high net-worth and wealthy individuals. They require unique insurance needs that defend their fortune of valuable possessions such as priceless art, yachts etc, along with their homes and cars. They also lie at a risk of lawsuits and any place where a lawsuit can hurt them is a liability. This makes their life insurance needs different from other people. So, why and how should they sieve through different life insurance types and focus on the right life insurance policy? Read on.

Avoid Insurance Dysfunction

Living in homes that cost north of a million dollars might be common for the rich, but unfortunately it is also common for them to overlook the risks of not protecting insuring their wealth. A big mistake wealthy people make is to underinsure major threats and over-insure the minor ones. They carry low minimum on their homeowners and auto policies, which can leave a gap putting their wealth at risk.

Avoid Mass Market Insurance Products

Mass market insurance products are designed for people with average/regular income, which do a good job of protecting their interests, but they always fall short for HNIs. For example, Hulk Hogan found himself in a spot when his teenage son crashed his car and left his co-passenger badly injured. He exhausted his limit on auto policy provided by a mass market insurance product, exposing his entire fortune. He had to reach for an out-of-court settlement with the victim’s family. Avoid similar instances by opting for top high-net-worth insurance underwriters, which offer unlimited legal defense and legal counsel that specializes in the rarified litigation issues of the rich.

Dealing with Yachts

You not only have to insurance yachts against accidents or damage by extreme weather conditions but also consider the political risks involved. It is crucial that you have the proper flags flying at the right time depending upon the waters you are traveling in. Once you encounter political risks or Somali pirates, they’ll red-flag those areas and tell you to stay out or you won’t be covered. Additionally, you have to take attendant policies for your staff working on the yachts.

Securing Rich Man’s ‘Toys’

Wealthy people love their ‘toys’ like jewelry, wine, art, other collectibles, racehorses etc. HNIs should understand the value of each and insure them accordingly. Insurance of a few hundred thousand dollars might sound like a huge number for each item, but most of the times their insurance value turns out to be a few million dollars. Ensure that your policies cover accidental damages, holdings in multiple locations, mysterious disappearances in addition to theft and damage. Upgrade your policy every three years to keep the insurance conditions relevant and minimize risk. It is also recommended to upgrade the insurance policy of art when its artist expires, since the value of art appreciates really fast.

Insurance from the Help

It’s not unusual to see an army of housekeepers employed in a wealthy man’s house. Regardless of how loyal they seem, it’s always a good idea to get the Employment Practices Liability Coverage, or EPLI. This is a rider on an umbrella policy that will protect you against their claims for wrongful termination, discrimination or even sexual harassment.

Save Millions in Estate Taxes through Life Insurance

Planning for financial security of the family after their demise is a must for even wealthy individuals. By taking life insurance, millions can be saved in estate taxes. It is better to use life-insurance as a low-cost hedge to cover your estate tax and pass the money to the next generation. For example – Both spouses have $30 million in assets and can leave a total of $15 million tax-free inheritance to their heirs. To pass the difference, they can use life insurance to fund an estate tax of approximately $10 million as long as it is held in an irrevocable life insurance trust.


If you belong in the wealthy and HNI bracket, don’t take insurance lightly and invest in the best one so that you don’t have to shell out millions in lawsuits, liabilities or any such issue.

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