Have You Outgrown Mass-Market Insurance?

In most aspects of your financial life, you’re probably very selective about the partners you choose. Your wealth advisor, for example. Your accountant. Your estate lawyer. You spend a good deal of time vetting these professionals based on their experience, education, and recommendations from trusted friends.

But what about your insurance agent? How well do you know his or her credentials? Does he specialize in personal risk, advising above-average earners like you? Is he offering you more than just mass-market carrier options?

It turns out, a lot of financially-savvy people aren’t asking these questions. Three-quarters of them, in fact, according to the Insurance Journal, whose experts estimate only about 25% of today’s “high net worth” insurance segment is written by carriers who specialize in personal risk for successful households.

You may not self-identify as “wealthy,” “affluent,” or “high net worth.”  (Granted, these are arbitrary terms.) But there’s no room for modesty when it comes to fully protecting your home and assets. So, putting all labels aside, here are six signs that might indicate you’ve outgrown standard insurance carrier options—and the agent who’s recommending them.

1. You recently bought an above-average home.

In Massachusetts, $400,000 is the median price for a single-family home. That’s average. Mass-market insurance is sufficient for the average home, along with the average home’s contents and other structures.

But if you’re fortunate enough to purchase a high-value home (roughly $1M or more), it’s probably time to start thinking about a specialty carrier for your homeowner’s insurance. Specialty carriers are unique in a few key ways:

• Their coverage limits can go higher—particularly when it comes to personal liability coverage.
• They structure their policies in ways that make it easier to insure the valuable contents inside your home (furniture, rugs, art, jewelry, wine, and other collections), even as you acquire new things.
• In the event of a loss, your first point of contact would likely be with a licensed claims adjustor—as opposed to a call center rep—to make the process that much easier and more efficient.
• Specialty carriers also employ in-house teams of experts who know how to maintain, repair, and replace unique possessions including art, jewelry, antiques, vintage autos, etc.
• Options for watercraft coverage are more nuanced and robust.

Establishing the true cost of replacing your home after a total loss is another area where specialty carriers excel. Many will come on site (as needed) to assess and document the structural elements of your home before any loss occurs. This is especially important if your home includes fine millwork, period details, high-end building materials, sustainable design, or other features that are difficult to quantify and recreate in like kind.

2. Your agent has never discussed personal cyber coverage with you.

Cyber crime is evolving so rapidly, insurance companies are struggling to keep up with their customers’ exposures.  In the past, personal insurance policies focused mostly on identity theft, designed to help insureds repair their credit profile if a thief got hold of personal information in order to rack up debt.

But identity theft policies don’t cover actual funds lost—an increasingly frightening gap for folks who have sizeable amounts in the bank. More carriers are starting to address this gap with coverage known as personal cyber insurance. Some do it better than others, while few insurance agents are well versed in the latest terms, exclusions, and overall use cases. For example:

Let’s say your bookkeeper asks you to wire $25,000 for a purchase you’ve been discussing. And you do it, only to find the request wasn’t actually from your bookkeeper. It was a from a cyber criminal with access to your contact information.  Would standard insurance help you reclaim that lost money? Without a personal cyber policy, probably not. And this type of scam (known as social engineering) isn’t the only example of how well-to-do individuals are currently being targeted online.

If your agent isn’t proactively alerting you to personal cyber exposures and recommending coverage options, you may have outgrown him.

3. You’ve hired a nanny, a housekeeper, or a home chef.

Opening your home to a professional caregiver or domestic worker could be the best decision you’ve ever made. We all need more help these days. Knowing your children and other loved ones are in good hands offers invaluable peace of mind. It also introduces a host of serious liability exposures…

In Massachusetts, if your domestic employee works 16 hours/week or more, on a regular basis, you are required to carry worker’s compensation for him or her. And while the process of securing nanny insurance isn’t complicated in and of itself, the coverage does need to be reviewed in the context of your overall insurance plan. After all, illness and injury aren’t the only things that can go wrong with a full-time employee. Consider these scenarios:

• Your nanny gets into a car accident, seriously injuring another motorist, while driving your children to an activity. Are you covered?
• Your nanny accuses you of harassment, discrimination, or wrongful termination. Are you covered?
• Your neighbors ask about a “nanny share” arrangement, offering to chip in on your nanny’s salary, in exchange for their kids joining the play sessions at your house.

The average insurance agent might be able to help secure the worker’s comp policy you need in this case. But it’s less likely that he’ll understand the full scope of risks and implications you’re now facing.

4. You’ve started serving on a board or an advisory committee.

As you grow in your career, new opportunities continually present themselves. Board service is a prime example. And while it’s true that many organizations carry D&O coverage to protect their directors and officers collectively, it often makes sense to explore individual policy options, where you aren’t drawing from a shared pool of coverage, in the event of a loss.

From 2015-2019, class-action lawsuits filed by shareholders against board directors and company officers more than doubled. According to Corporate Board Member, approximately one in 12 public companies was the target of a securities class-action lawsuit; among the S&P 500, the average was one in 10. But it’s not just the board members of public companies who find themselves at risk.

Private groups and non-group organizations also face litigation risks. If you’re contributing your time in any kind of advisory role, you probably need advice that a mass-market insurance agent can’t provide.

5. You’ve recently established a trust and/or an LLC.

Your financial advisor or estate lawyer may have recommended establishing a trust to protect your assets from probate court, estate taxes, and other potential drains that can occur when transferring wealth to the next generation. This is often a smart idea—but an incomplete one, unless your insurance policies are updated in line with your strategy.

If the trust is not a named insured on your home insurance policy, and anything ever went wrong, you could wind up lacking coverage. An agent (and a carrier) who deals with family trusts often is much better equipped to structure your policies with everyone’s long-term interests in mind.

6. You haven’t reviewed your umbrella policy or personal risk profile since…

Getting an umbrella policy is the first step to protecting your wealth and high-income earning years.  So why did we list it last? To make sure it’s fresh in your mind, as you finish reading this post. If you haven’t taken this step yet (do I need umbrella insurance?) or you’ve never reviewed the umbrella policy you have in place, this is your invitation to set up a meeting with an advisor on our team: 508.339.2951.

Without a properly structured umbrella policy, all of your assets are at risk if a lawsuit is brought against you.  Countless unforeseen circumstances can draw you into a suit, and paying out of pocket for defense costs can create a massive financial fallout.  Just as you check in with your financial advisor, you should be meeting with an insurance advisor (annually, at minimum) to discuss your complete and updated financial picture.

Bottom line: insurance is an interesting product in the sense that everyone needs it, starting at around age sixteen. Working with a great agent is always important, but when you’re young, carrier options are more or less interchangeable. The same holds true when you’re renting your first apartment or buying a starter home.

Now, fast-forward to your prime earning years. You’re making more money. You own your “forever home”—maybe two or three of them. Your family may have grown to include a spouse and children. You vacation more. You own finer things. All these changes add up to a more complex personal risk profile. Suddenly the insurance companies that made sense for you before aren’t set up to handle your needs. And the agent who knew enough about insuring your Camry and your 1,000 square-foot condo is way beyond his element when it comes to protecting your current home and assets.

If you recognize any of these signs and you’re still working with a mass-market insurance carrier/agent, give our team a call: 508.339.2951—just to see how your coverages could be improved.