In order to help high-net-worth clients maximize their liability protections, it's important to understand their lifestyles through the development of a personal risk management strategy.
This discussion is a positive dialogue, which includes defining goals and objectives, identifying and analyzing loss exposures, selecting and implementing risk management techniques, and monitoring and measuring the risk management program.
Here are four questions you need to answers to when determining the risks that high-net-worth individuals face:
|1. What do they own?
It's important to have a full understanding of what is owned (including their unique features), the legal entity that owns the asset and insight into how that may change in the future. Here are some common ownership classes:
- Homes (primary, secondary, pools, trampolines etc.).
- Cars.
- Recreational vehicles.
- Boats/watercraft.
- Rental properties.
- Pets (dogs, horses, etc.).
- Co-ownership of property with others.
Asset ownership should be carefully assessed so properties owned in the name of an LLC, trust or other legal entity are afforded coverage under insurance policies that are secured.
Household activities come with liability exposures. (Photo: Shutterstock)
|2. What do they do?
Have a thorough understanding of the household's activities to identify liability risk exposures. These include:
- Occupations (high profile, student, home-based, self-employed, artist, writer, Uber).
- Hobbies (equestrian, skiing, off-road, blogging, social media).
- Board participation (For profit and nonprofit).
- Volunteer work.
- Travel (domestically / internationally).
- Charter or rent (watercraft, aircraft).
- Rent property to others.
Related: Summer travels of the wealthy: Protect them where'er they roam 
Nannies, cleaning crews and caretakers may have state requirements for workers' compensation insurance. (Photo: iStock)
|3. Who do they employ?
Understanding who your clients' employees are, the terms of employment and the management of the employees are key in helping your clients manage the potential risk associated with being an employer. As a risk manager, you should have a complete understanding of the following:
- Who are they employing: nanny, elder care, caretakers, etc.
- Terms of employment: employee versus independent contractor; full-time versus part-time.
- State requirements: workers' compensation insurance, disability insurance, etc.
- Management style: background checks and references; job descriptions and manuals; onboarding and employee exit best practices.
Agents and brokers should identify and provide protection against specific risk exposures to high-net-worth clients. (Photo: Shutterstock)
|4. What protections do they need?
Once the risk exposures have been identified, it's time to talk protection. Meet with your clients to discuss recommended solutions to protect them from the financial and emotional loss that could be incurred if they are faced with a lawsuit.
Depending upon the risk exposures identified, your recommendations should include a mix of risk management techniques. There will rarely be only one risk management technique, such as the purchase of insurance, to help your client maximize their liability protections. More often, the recommendation will be to implement risk mitigation actions in conjunction with an insurance solution.
Here are a few examples of how a sound personal risk management program pairs traditional insurance solutions with risk mitigation techniques.
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Risk: Live-in nanny
Exposure: Injury to employee
Solutions: Clearly defined job description and duties, and on-the-job training, driving record and background check, Workers' Compensation and Disability insurance.
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Risk: Rental property
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