Take a good look at the umbrella

“By far the single most important specific coverage issue we address is personal excess liability insurance, because it helps shield the family's assets from claims,” said Gary Pasternack, director of insurance advisory at Bessemer Trust. “Often clients come to us with inadequate limits.” High-net-worth specialist insurers like ACE Private Risk Services, AIG Private Client Group, Chubb, Fireman's Fund and PURE all offer excess liability limits that far exceed what is available from direct writers and other standard personal insurers.

Pasternack suggests that net worth should not include protected assets like qualified retirement accounts, irrevocable trusts and homesteaded residences, but should include five to 10 years of irrevocable trust distributions or other substantial income depended upon to pay living expenses.

Shield the client's wealth from the uninsured

The Insurance Research Council (IRC) estimates that 12.6% of motorists was uninsured in 2012. Oklahoma, Florida, Mississippi, New Mexico, Michigan and Tennessee are among the worst for this, as the IRC estimates that at least one in five motorists in these states is uninsured. Comprehensive reviews of wealthy families uncover missing or inadequate UM/UIM coverage.

Mind their businesses

Commercial exposures are common and diverse in this niche. Sometimes they stem from the property itself, such as gentleman farms, ranches, or historic homes that are regularly toured by the public. Other times, the owner's primary business creates the risk, such as the independent consultant who works out of a home office. The 'incidental business' coverage found on homeowners' forms typically isn't enough and professional liability is likely excluded. A specialist insurer will endorse additional coverage to address the exposure; in many others, obtaining commercial coverage is necessary.

The nanny and the home aide

Be sure to identify all of the domestic staff and list them on the appropriate policies. Just because that nanny, chef or gardener has been with the clients for a long time doesn't mean employment practices liability coverage isn't necessary. What's more, become an expert in domestic workers' compensations laws, options and procedures so you can be an advocate for clients with qualifying employees, whether the coverage is compulsory or not in a given state.

ID the D&O risk

It's quite common for wealthy clients to serve as directors or officers for a variety of professional, philanthropic or other not-for-profit organizations. What's important is that you find all of them, then obtain the appropriate coverage, whether personal, commercial or both.

What Size Umbrella?

While eliminating coverage gaps is formulaic, choosing an umbrella limit is not an exact science. Most agree that the limit should be influenced by the value of the assets at stake, the family's risk tolerance and lifestyle-related risk profile. Clients should maintain a personal excess liability limit that is at least equal to their net worth, up to $20 million, says Gary Pasternack, director of insurance advisory at Bessemer Trust. “Greater coverage amounts should be considered when the client has an exposure to a large liability loss or has a low tolerance for the risk.”