For individuals and families in or near retirement, protecting wealth and managing expenses are essential priorities. The most serious threats to a retiree or near-retiree’s net worth involve exposure to high-stakes liability lawsuits and significant property loss at home, while many approaching retirement overlook easy savings opportunities in their personal insurance program. A properly structured personal property and casualty insurance program – including homeowner, automobile and liability coverage – can play a key role in successful insurance planning for retirement.
These are among the key findings of a new white paper released today by ACE Private Risk Services, the high net worth personal insurance business of the ACE Group. The white paper, Retire with Confidence: How to Structure a Personal Insurance Program, includes a 13-step guide to build and maintain a personal insurance plan into retirement, and summarizes a strategic approach to personal risk management by engaging the assistance of an independent insurance agent. The full whitepaper can be found here http://www.acegroup.com/us-en/assets/ace-insurance-planning-for-retirement-white-paper-oct-2012.pdf.
“Financially successful couples and individuals in or near retirement face some of the most complex decisions about insurance at any time in their lives,” said Robert Courtemanche, Division President, ACE Private Risk Services. “Retirees and pre-retirees should craft a personal insurance program with sufficient umbrella liability coverage to match their at-risk assets, ensure their home is covered to its full replacement cost instead of its market value, as well as seek savings through higher deductibles and bundled insurance policies. By working with an independent insurance agent, individuals and families with emerging and established wealth can protect their assets and cut their insurance expenses as they plan for a successful and enjoyable retirement.”
The ACE Private Risk Services white paper includes 13 comprehensive recommendations for robust wealth protection and strategic expense management in retirement planning. Among the best practices recommended in the ACE Private Risk Services white paper are:
- Purchase umbrella liability insurance to match at-risk assets. Wealth tends to attract lawsuits, and if you are held liable for an accident resulting in serious injury, the jury award or settlement could approach tens of millions of dollars. ACE research has found that more than 40 percent of wealth households have less than $5 million in umbrella liability coverage, including 21 percent who have none at all.
- Seek full replacement cost coverage for your home. The main home and any vacation homes often represent a significant, if not the largest, component of net worth for people near retirement. Yet most homes in the U.S. are underinsured. The best insurance policies will provide full replacement cost coverage for the home structure, including rebuilding with similar quality materials, even if that cost exceeds the coverage limit in their policy.
- Increase homeowner and auto deductibles. Increasing the deductible amounts on homeowner and auto policies can save hundreds, if not thousands, of dollars per year in insurance premiums. Increasing the deductible on a million-dollar home from $500 to $2,500 could save $900 per year.
- Name trusts and limited liability companies (LLCs) on insurance policies. Wealthy families near retirement often place homes, valuable collections, and financial assets in family trusts to shield assets and maximize wealth transfer to future generations. Families and advisers must remember to name these trusts and LLCs on the appropriate insurance policies, or risk leaving themselves or the trust unprotected against liability lawsuits.
- If the residence is part of a property association, make sure the homeowners policy includes ample coverage for loss assessments. For many, a successful retirement means moving to a home that is part of a golf community or similar recreationally based property association. Have your insurance agent review the association’s bylaws and insurance program to understand your responsibility for loss assessments, which can sometimes amount to tens of thousands of dollars.
- Attend to liability risks from hobbies turned into small businesses. Winding down a career may involve devoting more energy to a long-time hobby, such as a vineyard, farm, or horse stable. Although the income produced may be trivial, running a small business creates substantial liability risks.
- Take inventory of home contents and make sure the coverage limit for personal property matches its replacement cost.
- Ensure that the homeowner policy includes coverage for building code upgrades.
- Use the added protection of a valuables policy for jewelry, art and wine collections.
- Address the need for director’s and officer’s liability coverage if volunteering as a board member or trustee of a charitable organization.
- Get credits for loss prevention systems and upgraded plumbing, electrical and heating systems.
- Bundle different policies with the same carrier.
- Insure classic cars with a classic car policy, not a standard auto policy.