By Lee Sherman
Congratulations, you made it! Once you’ve achieved financial independence it’s time to protect the spoils of that success. But with rewards comes increased risk. You’ll need to double down on your insurance to make sure you are properly protected.
Everyone knows that it’s important to insure high-ticket items, however, not everything you need to insure will be as straightforward and simple as insuring your home or car.
High-end collectibles such as antiques, art or jewelry can vary wildly in value over time. Your first step in getting them insured is to get an appraisal from a recognized expert who can tell you how much it is worth and make a recommendation on how much insurance you need so you don’t fall short.
These things are relatively minor investments for a wealthy collector. When you reach a certain status in life, you may have far more expensive items to worry about, for example a mansion, a boat, or a private jet. Besides the regular maintenance required, it’s important to have them fully insured and that means supplemental insurance to cover unforeseen circumstances. For example, what if your private jet crashes? What happens if your plane gets hijacked? Does your insurance cover accidents or hospital bills for people other than yourself who may be traveling in your vehicle?
Insuring Your Intangibles
You may have even more specialized concerns. It may sound paranoid but wealthy people (or their children) are far more likely to be kidnapped and held for ransom. You’ll also need to protect yourself against frivolous lawsuits. It’s a sad fact of life but wealthy people can more easily become the target of an unscrupulous person.
While it is unlikely that you will lose such a lawsuit and have to pay more than what is already covered by your existing insurance, you’ll still want to be prepared for a scenario where that occurs. Your financial advisor may recommend that you have supplemental insurance. That’s where umbrella insurance comes in. It’s called umbrella insurance for a reason, you want to be prepared for a rainy day. Another reason for the name is that it is quite comprehensive and can cover other members of your family. It is also less expensive than other types of insurance.
What is Umbrella Insurance?
Umbrella Insurance is a type of personal liability insurance that covers you for claims that exceed what is already covered by your other policies. It can also serve as primary insurance should you suffer losses that aren’t covered by those policies.
Remember that seemingly far-fetched kidnapping example? With umbrella insurance, other members of the family or household are covered, not just the policyholder. Umbrella insurance isn’t for the policyholder’s personal assets. Rather, it covers injury to others or damage to their assets.
Umbrella insurance is recommended if you have more than $100,000 in insurable assets or if you expect to be earning more in the future than you currently are. The key takeaway is that more expensive and unusual types of assets will require additional kinds of insurance in order for you to be fully covered.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.