Navigating Insurance: A Guide for High-Net-Worth Individuals

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Insurance is crucial for managing risk, but finding the right coverage can be complex. Your insurance needs evolve with changes in your life and net worth, therefore we believe it essential to regularly review your policies. With proper coverage, you can protect your family and assets, giving you peace of mind. At Freestone, we’re here to help. This guide covers key considerations and tools for determining appropriate coverage for high-net-worth individuals and families.

Umbrella Insurance

Umbrella Insurance, also known as Excess Liability insurance, provides extra protection beyond your homeowner’s and auto insurance. It should include personal liability and uninsured motorist coverage. If you have domestic employees or serve on any boards, consider adding employment practices liability and directors’ and officers’ coverage.

Coverage Tip: Ensure your umbrella coverage matches your net worth and review it regularly. Business owners or those with separate liability needs should ensure their coverage protects personal assets. Middle-market carriers may have limits on high-amount policies, so a full Property & Casualty review with Freestone can help.

Life Insurance

Life insurance typically covers income replacement, debt payoff, and estate liquidity. There are two main types:

Term Life Insurance: Lower cost, short-term needs (10-30 years), with guaranteed premiums. Ideal for covering specific periods such as the duration of a mortgage or until children are financially independent.

When determining coverage, consider factors such as income, debt, assets, savings, and the timeline for your financial obligations. Typically, term insurance is needed during working years.

Permanent Life Insurance: Provides lifetime coverage, may build cash value, and may pay dividends. Though more expensive, it’s best for estate liquidity and ensuring long-term financial goals are met.

Identify the goal of the policy—whether it’s for estate liquidity, cash value accumulation, or providing for heirs. Choose the appropriate policy type accordingly. For instance, estate liquidity often involves second-to-die policies for couples to cover estate taxes. Estate planning should include reviewing state estate taxes and financial plans.

Disability Insurance

Disability insurance is often overlooked but is crucial for protecting your income if you become unable to work. Employer plans usually cover up to 60% of income, but supplementing with an individual policy may be necessary, especially for high-earning or specialized careers.

When Choosing Disability Insurance: Consider the definition of disability (any occupation, modified own occupation, or own occupation), partial or recurrent disability coverage, inflation protection, elimination period, available liquid assets, and potential additional costs related to disability such as home modifications or extra medical expenses.

Long-Term Care Insurance (LTC)

A financial plan can help determine if you should purchase LTC insurance or self-insure. The right solution often balances between these options, considering both financial and emotional factors.

LTC Considerations: Review current LTC costs in your area or where you plan to retire, check if your employment benefits include LTC coverage, and estimate that you may need 3-4 years of care based on averages. Consider inflation when determining coverage amounts. Hybrid policies, which combine aspects of life insurance and LTC, offer guaranteed premiums and may return unused premiums or provide a death benefit. A permanent life insurance policy with an LTC rider can also be a flexible option, allowing you to accelerate the death benefit for LTC needs, and providing a death benefit if LTC is not needed.

Protect What Matters

At Freestone, we believe risk management is an important aspect of your financial health. Whether it’s for liability, life, disability, or long-term care, we can work with you and our trusted insurance partners to determine appropriate coverage types and amounts based on your unique situation. Navigating insurance can be complex, but with the right guidance and regular reviews, you can ensure your family and assets are well-protected. Let us handle your insurance needs so you can focus on what truly matters. Reach out to us for a complimentary full review and start securing your financial future today.

Important Disclosures: Nothing in this article is intended to provide, and you should not rely upon it for, insurance, accounting, legal, tax or investment advice or recommendations. We are not making any specific recommendations regarding any financial planning or tax strategy, and you should not make any financial planning or tax decisions based on the information in this article. This article is intended for educational purposes only and to discuss a few limited aspects of a very complex financial planning strategies. This article is not a comprehensive or complete summary of considerations regarding its subject matter. Each individual is in a different situation with their own unique complex circumstances and the options discussed herein are not appropriate for everyone. Please consult your Freestone client advisor and a tax professional regarding options specific to your needs.

Posted By: Freestone