Individuals & families with high income and a growing net worth transition thru a series of steps in their insurance needs and choices. Having a playbook to follow may have some value in making strong choices to insure your risk is bullet proof. Below are age based links that will give you suggestions and feedback to assist you in selecting the right coverage, at the right time, for comprehensive protection.
The Primary years: <30 thru age 40
The Growth years: age 40-55
The Empty Nest age: 55 - >65
If you are in the Primary years, many of your purchases of insurance are for the first time, so a heads up can be valuable.
Property insurance - whether you rent, or own a property the decision on how you insure your property is based primarily on how much you have. Is what you own general contents or do you own some valuables such as jewelry? (Valuables need to be insured separately). Once you have identified these 2 points, the decision is whether you buy insurance off the internet and pay a lower premium, or have a policy custom designed to fit your personal needs at a slightly higher price. Property insurance claims do not happen often, but a custom designed policy will leave you appreciative that you spent the extra dollars to have your own personalized policy.
Auto Insurance - is a bit of a commodity with some concern if you are driving high valued autos. Make sure your policy has no less than $500,000 of Liability coverage and no less than $1,000 vehicle deductibles.If you have a claim always inquire as to the value of using your insurance for reimbursement. Auto coverage is a computer rated product that will be affordable if you have no tickets, no accidents, and a good credit score. But if you have an unfortunate accident the surcharges begin. Using your auto insurance for towing or roadside assistance is not a good choice.
Liability Insurance - comes with both your home policy and auto policy. The question is whether you have other exposures like: a boat, second residence, or if your career track and future income is worth providing more coverage than just the basic home and auto policies. Adding an Umbrella Excess Liability policy for as little as $200 per $1,000,000 of extra coverage can be a wise choice.Life Insurance- in that life insurance is coverage based on your age and your health, getting an early start on this protection is a strong choice. Integrating coverage that is provided by your employer makes sense, but recognize that you may in the future change jobs and leave the employer sponsored coverage behind. When responsibilities begin to take hold, it is time to begin a relationship with a seasoned life insurance agent who has access to multiple companies. Whether providing for a spouse, children, or even dependent parents, you need to identify 1.) the need for coverage and 2.) the number of years coverage will be needed. A good rule of thumb is that 25% of your coverage should be permanent coverage, written with a mutual insurance company. Also if you have children make sure you have life insurance for your wife.
Disability Insurance - hopefully your employer provides robust Long Term Disability Coverage, because this is very important protection that is pricey if you have to buy it on your own. Again, the amount of coverage should match your income needs. If you need $10,000 after tax per month to meet your financial obligations, make sure you match that in after tax coverage. Coverage needs to be in place for your entire working career, typically to age 65.
Other Exposures - if you have other exposures, such as: a boat, a motorcycle, or even a second residence, make sure you have at least $500,000 of liability insurance on that exposure. And if you currently have an umbrella that the agent/insurance company are aware of the exposure so that your umbrella will apply to any serious accident.
And finally - And Very Important - with all these coverages take the time to ask the agent or company what is not covered, or where there might be coverage limits so you are fully informed on where you might be self-insured!!
The Growth Years - are normally a bit more complicated in comprehensively meeting your insurance needs. When you add children to the equation, vacation properties, and estate planning issues, a well-organized plan with ample protections is a solid foundation to being bullet proof. Insurance needs evolve and a strong communication with a seasoned agent will be an asset.
Property Insurance - usually finds you in the home that your family will grow up in. With so much activity, protection devices like: alarms, leak sensors, and generators are essential to assist in preventing accidents and minimizing inconvenience. Pay close attention to valuables, collections, and art work to provide full coverage in the event of a loss. With more time in a home you should be able to control surprises, so increase your deductible and save the premiums. This is the stage in life where having an inventory begins to make sense. Whether you hire a professional or simply go room to room with your video, the hardest thing in a serious fire is to remember all that you have lost. With years in your home you accumulate a lot of stuff.
Vacation Properties - normally coastal, lake front, or in the mountains. An important step here is simply ask your agent about the insurance cost, and issues like flood or wild fire before you buy. It will save $$ and inconvenience.
Auto Insurance - this is one of the more painful areas of coverage where early on you enjoy the benefits of better auto’s premiums, only to move into the danger zone of children beginning to drive. The overwhelming percentage of children have accidents and get ticketed for moving violations. The accidents and tickets only push the cost of insurance up. Our suggestion is, depending on the severity of the accident, discuss with your agent not submitting a claim until it exceeds $3,000. Guard your record/history and the eventual cost of insurance until you transition you children off your insurance policy.
Recreation Vehicles - make sure motorcycles, ATV’s boats etc. are properly insured, and your umbrella insurer provides protection as well.
Domestic Employees - when you move past infrequent help or greater than 20 hours a week, make your nanny or full time domestic legal, start collecting payroll taxes, and provide Workers Compensation coverage. Your home policy has an EXCLUSION for anyone eligible for Workers Compensation, and this presents a large exposure that is uninsured unless you make this legal. If you pay your help cash you cannot get Workers Compensation coverage.
Liability Insurance - your building a balance sheet, and you have future income to protect so make this coverage generous. The addition of vacation properties and especially youthful operators makes this coverage essential.
Life Insurance - the need for coverage grows as your family grows, but success makes structure important. Estate taxes both on the Federal and State level become a real source of concern that generally prompts an Irrevocable Life Insurance Trust to shelter the benefits. You will need an estate and trust attorney to draft and execute a trust. It is an important consideration here to not only take a short term view on using a trust to meet your needs, but building a model to get a strong understanding on implications of what issues surround continued success. A short term view in while using a Life Insurance Trust will add cost and complications later.
Disability Insurance - if your total income has out run your employer’s sponsored disability coverage, look to supplement with your own coverage. Strong growth of the investment assets on your balance sheet will begin to offset the total need for coverage.
Long Term Care - based upon your level of success this may be a coverage you should explore, possibly even for parents. The great majority of the population will live a long life and need some assistance near the end.
And finally, still important - ask your agent for a list of exclusions and limitations on your policies. Do not get caught unaware.
The Empty Nest - as you wind down your commitments to children and eventually your business, there should be an effort to simplify and control future cost.
Property Insurance - there is a bit to be saved here, whether you own one or multiple properties. Having experience with all the things that could go wrong with your properties, it’s my recommendation that you push your deductible to the amount you can handle and save $$ in the process. Trimming valuable schedules to self- insure some of the smaller pieces will also add to savings. Property insurance policies used to be a set package of coverages but you now have the ability to adjust limits to your own particular needs, so find an agent who pays attention to details.
Auto Insurance - not much new here, just make sure your rates reflect the reduced mileage to get the lowest cost.
Domestic Employees - providing coverage for domestic’s, and possibly nursing care in retirement, still requires Workers Compensation coverage to shield yourself from any potential of an injury while in your employ.
Liability Insurance - just as when you were beginning your career your income was at risk, as you approach retirement your balance sheet is at risk. Make sure ample coverage is implemented and that all your exposures are reported to the Umbrella policy for excess coverage.
Life Insurance - part of the discussion in an empty nest is Estate Taxes. Now that you have grown a nice estate, the government will tax you up to 40% to pass it onto your children/beneficiaries. Do you care? If you would like to minimize this shrinkage of your nest egg, Life Insurance is the most basic mechanism to address the estate tax exposure. You can get some relief with Residence Trust, Grantor Trust, Limited Partnerships and Corporation, but the legal bill will add another layer of cost. When you determine your retirement needs, an organized estate plan makes sense. People understand that life insurance premiums increase as you get older, so take a moment to study the value of a paid up policy on a grandchild. This is a gift of both the valuable cash build up and the long term benefits. It is a high performing choice that will be most appreciated long after your time has come.
Long Term Care - early into the empty nest is when most of these policies are implemented. If you are concerned that a long nursing home stay will eat up a large portion of your estate, LTC coverage is sensible. There are different types of LTC coverage so do a thorough review, some of the hybrids are a better choice.
And Finally - know your policies exclusions and limitation. This is a period when you may have the extra time to spend with your agent in sorting out exposures and it is vital to you being bullet proof.