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Conservative estimates put the number of high-net-worth individuals (HNWIs) — people with financial assets worth at least $1 million — in the United States at over 6 million. In spite of a rough year for many people in 2020, one report shared that the net worth of an HNWI grew 12.3% in 2020.

In addition to staying on top of the tax laws and preserving as much of their wealth as possible, HNWIs have another area of their financial world that is unique to them — insurance.

The average American family buys insurance to protect their assets, such as their home and auto. But an HNWI, in addition to also needing to protect these, has some exclusive personal property that they need to insure correctly. This article will look at the distinctive possessions they must consider insuring, but first, we’ll look at three types of insurance protection the HNWI needs that everyone has in common: life, health, and disability insurance.

Life, health & disability insurance for high-net-worth individuals

These three types of insurance are the “must have’s” for every adult, but the HNWI has to look at these a little differently when making decisions about how much of each to purchase.

Life insurance

Anyone who has a family and wants to secure their financial future when they die needs to own life insurance. HNWIs are often concerned with passing their wealth down generationally, which means minimizing the estate tax bill. The current tax plan provides a tax exemption for the first $11.7 million of assets, with the balance of the estate being taxed by the federal government up to 40%. Twelve states and the District of Columbia also impose estate taxes, with Hawaii and Washington State having the highest estate tax top rates in the nation at 20 percent. Six states also levy inheritance taxes, with Nebraska having the top rate at 18 percent.

So, an ultra HNWI and their family living in Hawaii or Washington State could lose up to 60% of their net worth at the time of their death, after exemptions. Because of this, HNWIs must buy larger face amounts of insurance to ensure that estate taxes are paid, and hard-earned assets don’t need to be liquidated to pay them.

Health insurance

No one wants to have to sell possessions they’ve worked so hard to accumulate because of excessive medical bills, including HNWIs. For example, heart surgery alone can exceed $250,000 in costs, and it’s certainly not unheard of that hospital and doctor’s bills for surgery and an extensive hospital stay exceed half a million dollars or more.

True, HNWIs find it easier to pay the monthly premium for their health insurance coverage than most people, helped by the fact that they can select a higher deductible to lower their premium, but being under-insured when it comes to health insurance can be costlier than replacing a home or automobile.

[ Related read: What does health insurance cover (& not cover)? ]

Disability insurance

Disability insurance protects “the goose that lays the golden eggs.” The vast majority of HNWIs didn’t inherit their wealth; they’re earning it, and not all through passive income such as investments or real estate. Many HNWIs own businesses that produce the bulk of their annual income. They may be able to pay the bills a bit longer than many people if they don’t get a paycheck every two weeks, but ultimately, they too will be in financial pain if they can’t work due to a long-term disability.

Illness and injury can strike anyone at any time, including the HNWI. They may have more money in savings or more assets they can sell to pay the bills, but those monthly bills for them can be surprisingly high. HNWIs can select longer waiting periods before they begin receiving disability insurance benefits to lower their premiums, which is an option everyone has who buys disability insurance.

Other insurance needs for high-net-worth individuals

In addition to the aforementioned types of insurance, the HNWI needs to find and buy other forms of insurance, often working with agents and brokers that specialize in finding them insurers and insurance products to meet their unique needs. Here are some of the other types of coverages HNWIs buy to protect themselves and their assets.

Domestic employees’ insurance

HNWIs who employ cooks, nannies, housekeepers, gardeners, or others to work in their homes need insurance coverage to protect themselves if an employee sues them for damages. They also must carry workers’ compensation insurance to replace an employee’s lost income if they’re injured on the job.

Coverage for wine

Many HNWIs have wine cellars with expensive wine collections. Their standard homeowner’s insurance policy may not be adequate to cover a loss. Wine insurance can provide coverage to replace the entire dollar amount of the collection, up to a specific limit for each bottle.

Fine art insurance

Like wine collections, the cost to replace fine art often exceeds the limits on most standard homeowner’s policies. Fine art insurance can cover the appraised value or full market value and cover the art when it’s first purchased and away from the HNWIs home.

Kidnap and ransom insurance

Though it’s rare, it does happen. HNWIs that are victims can buy policies that cover this type of situation, and it often covers a crisis management team of professionals experienced in this field.

Yacht insurance

Coverage is for the full replacement cost of the yacht, but also can include coverage for a crew, high-end construction costs, and the personal property on the yacht. Some yacht policies have limitations for unsafe waters, such as those plagued with pirates.

Serving on for-profit & nonprofit boards

Many HNWIs serve on nonprofit and for-profit boards. The organization sometimes provides indemnification insurance, but the HNWI needs to purchase a separate policy if it doesn’t.

Special auto insurance

HNWIs often need auto insurance that isn’t provided by standard carriers to provide carjacking coverage, specialty car coverage, original equipment required by the manufacturer, and high limits – up to $10 million.

Key takeaways

High-net-worth individuals enjoy the rewards that come from the fruits of their labor, but they need to take some extraordinary steps to protect themselves, their family, and their possessions. Affluence has its advantages, but it often comes with additional expenses and makes the world of insurance more complicated for the HNWI.


Having grown up in upstate New York, Bob Phillips spent over 15 years in the financial services world and has been making freelance writing contributions to blogs and websites since 2007. He resides in North Texas with his wife and Doberman puppy.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

Insurance
Published July 26, 2021