Insurance coverages

Insuring for Your Level of Wealth

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Insurance is not always an exciting topic to talk about, but financial planners are well aware of the risks their clients can face when they are underinsured. Whether it is homeowners insurance or life insurance, the different types of risks people face can easily wipe out a portfolio or other assets when their clients are unprepared with inadequate levels of coverage. The more wealth people have, the greater exposure they have to other threats such as cybersecurity and unfortunately lawsuits; these are the types of incidents many people fail to consider when determining their policy coverage amounts. Amassing assets is one thing, but keeping them safe is another.

Consider finding out more about these types of insurance to help protect your wealth:

Life Insurance and Long Term Care Insurance (LTC): These are both primary types of insurance for protecting assets for the living. Life insurance should calculate on income replacement and asset accumulation of the deceased for many years, the impact to the beneficiaries from their income loss during the adjustment period, and paying off all outstanding debt associated with the deceased. LTC insurance protects assets that would otherwise need to be liquidated to pay for individual care in an LTC facility for an extended period. Depending on your state of residence, minimal assets are shielded from liquidation to pay for care with your home being one of the only assets protected if you’re the remaining spouse.

The Federal Deposit Insurance Corporation (FDIC): This covers money deposited in member banks for up to $250,000 per depositor per bank, and per ‘ownership category.’ Depending on the type of account and the ownership category, coverage can easily exceed beyond the $250,000 per depositor level.

The Securities Investor Protection Corporation (SIPC): This secures your cash and securities in member brokerage houses against the failure of the firm and theft. The maximum coverage of SIPC protection is $500,000 which includes a $250,000 limit on cash. You can structure your accounts in different ways (called “separate capacity” by the SIPC) to increase your total coverage. SIPC insurance is automatically part of investor protection when you invest in a member brokerage house. However, SIPC insurance does not cover investment loss due to declining stock market valuations.

Liability Coverage: If you own property such as a car or own a business, liability coverage is added to your insurance policies beyond casualty coverage for your homes, commercial buildings and your vehicles to cover beyond the repairs of the incident, injury, or death in case of being sued. For individuals with a high net worth, this is a way to offset millions from being liquidated from your assets if you end up in a legal battle with a lawsuit award going to the other party.

Umbrella Insurance Coverage: This is added additionally beyond regular property and casualty coverage and can cover items of value such as art, jewelry and sometimes irregular catastrophes such as identity theft or cybersecurity attacks.

Financial security starts with saving and investing, reducing debt and having the appropriate level of insurance coverage that increases as you accumulate wealth over your lifetime. These are not the only types of coverages available but are a good start if you have concerns about being insured for your level of wealth.

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