Hugh Purvis is a client executive for the Private Client Group at RCM&D, where he partners with individuals and organizations to effectively manage their risk profiles and protect their assets. Asset protection is very important to this demographic, so he discusses how high-income families and individuals should be using insurance to safeguard their wealth. Read on:
How do you approach risk analysis and management?
RCM&D created a comprehensive 360 Risk Assessment program that focuses on our clients’ overall insurance portfolio to determine where potential exposures exist. We understand how important it is to have adequate coverage in place to protect the family, business, estate (wealth transfer) and personal assets. By taking a consultative approach, we position ourselves to first understand the client’s specific needs and concerns and then present a comprehensive program with competitive pricing and contractual benefits.
It’s important to develop individualized protection plans that are realistic and attainable while also directly relating to our clients’ very unique circumstances and goals. My mantra is that we are not afraid to dig deep and ask the difficult questions. This is a partnership and we are being trusted to protect them and their legacy. By providing an extensive review and assessment of current portfolios, we are able to uncover hidden risks that might not have been realized and develop an optimal protection plan.
Why is risk management and asset protection so important to affluent families?
Proper risk management creates certainty during uncertain times. We live in a dynamic world and life changes directions all the time, which is magnified for affluent families because they have more complex risk management issues and planning concerns.
Insurance is often overlooked and undervalued, which causes gaps in coverage and increases exposure to unnecessary risk. The goal with insurance programs for affluent families is to preserve the assets and protect the family for the future.
How should affluent families approach risk management and asset protection?
For those with substantial wealth, developing a customized solution to protect personal and business assets along with generational planning can be a complex challenge. As a result, affluent families need a sophisticated adviser who will properly position their insurance program to address a wide variety of exposures and concerns. To do this, I begin with a thorough review of current coverage, provide an outline of gaps within that program, evaluate what is working, where improvement can be made and finally offer realistic recommendations that are cost effective and meet my clients’ needs. It’s important for the client to have a full understanding of their risks and cost so they can make an informed and educated decision.
What are the most common mistakes or oversights you see families making in this area?
The most common mistake we see families make is not conducting annual insurance reviews. Like any other financial asset, insurance needs to be reviewed annually to monitor and ensure that proper protection is in place.
Proper insurance reviews include discovering if the program is on track to meet current and future needs. Is the coverage adaptable to changing lifestyles? Does it provide maximum guarantees with the best available underwriting class at a competitive price? Are ownership, beneficiaries and premium funding in accordance with the estate plan?
In regard to personal assets, it is critical to annually manage real property, jewelry, fine arts collections and liability limits to ensure new purchases are not overlooked and liability limits are sufficient to protect the family, lifestyle and assets that our clients have worked hard to enjoy.
How can families use insurance to help protect their assets and mitigate risk?
Insurance plays a critical role in mitigating risk. I often discover several common gaps in coverage and to remedy these gaps I develop the right insurance program that will protect assets and manage unforeseen risks.
Examples of good programs will help our clients rebuild homes in cases of fire; protect them against a lawsuit as a result of accidents; provide income protection in the event of an illness preventing them from working; provide capital at the death of a business owner or key employee; protect retirement assets in the event of a Long-Term Care event; and help offset federal estate taxes with properly written life insurance. After all, life insurance can provide an unexpected expansion of capital exactly when you need it most.
What are the most common gaps in coverage you find your clients have?
In general, I find most affluent individuals are under-insured. The three most common gaps in life and health coverage are:
- Lack of income protection in the event of illness or injury that prevents our clients from working and thus providing income for their family or business;
- Lack of Long-Term Care protection in the event of a catastrophic loss (Alzheimer’s, cognitive impairment, etc.) that depletes the retirement nest egg and the ability to leave a legacy for the next generation;
- And hesitation to execute a business continuation plan that is properly funded preventing a proper valuation and transfer at the time of disability or death.
In regards to property and casualty insurance, the most common gaps revolve around liability protection and collections management. Most companies only offer excess liability limits of $5 million or less. For affluent families that often is not sufficient to protect their growing net worth. This becomes increasingly important if they have teen drivers, swimming pools, trampolines and sit on non-profit boards. All of these increase their likelihood of a potential catastrophic claim that could easily exceed $5 million.
What advice do you find yourself repeating to clients over and over?
I find myself repeating about the need for annual reviews to ensure the current insurance programs (life insurance and property and casualty insurance) continue to meet their specific needs and identify potential gaps in coverage.
Too often people purchase insurance and check it off their to-do list rather than taking the time to strategize and understand the program. This behavior and mindset often results in serious issues and challenges when the insurance is needed at the time of a claim or death of a family member. Don’t let insurance be just another item to check off of your to-do list. Learn more about coverage by browsing more insurance topics on AIS Insurance.
The information in this article was obtained from various sources. This content is offered for educational purposes only and does not represent contractual agreements, nor is it intended to replace manuals or instructions provided by the manufacturer or the advice of a qualified professional. The definitions, terms and coverage in a given policy may be different than those suggested here and such policy will be governed by the language contained therein. No warranty or appropriateness for a specific purpose is expressed or implied.