Don't Get Caught in the Insurance Gap

You've done it. You've taken time out of your busy day to search for and decide on insurance—be it home, auto, personal, life, or specialty insurance. You sit back and congratulate yourself on checking off another item on your to-do list. If you’re like most people, you probably don't think about your policies again until they come up for renewal. 

Your circumstances can change significantly from the time you select your policy to its renewal date. Even if there are no changes, you might benefit from taking a moment to check that you aren't exposed to common coverage gaps.

Coverage gaps are potential blind spots in your policies that may leave you unaware of the risks and potential expenses you could be responsible for if an unforeseen event—such as an accident, flood, wildfire, or another calamity—occurs.

On National Insurance Awareness Day and at regular intervals throughout the year, it is essential to review your insurance to identify any potential coverage gaps, such as underinsurance, and then take action to ensure you have the right level of coverage in place for your unique situation. 

First, let's identify common personal insurance coverage gaps and then take steps to make sure you have the right level of coverage in place for your unique situation.

Common insurance gaps for high-net-worth individuals

Even the most affluent individuals are not immune to coverage gaps. Standard insurance policies often lack the customization required to safeguard assets like fine art or private planes. Additionally, policies may not cover the increased liability risks that wealthier individuals and families often face. 

For high-net-worth individuals, the three most common coverage gaps are:

1. Underestimation of replacement costs for homes and high-value items

2. Exclusion of natural disasters

3. Insufficient personal liability limits  

Underestimation could occur because standard home insurance policies may not be calibrated for luxury homes, which often feature high-end finishes and state-of-the-art technology. Many homeowners use the market value of their property rather than the actual replacement cost. Imagine you enjoy cooking, and you update your kitchen with top-of-the-line appliances, granite counters, and tile from floor to ceiling. If your home is damaged, your home insurance policy may not account for the cost of replacing all those valuable upgrades.

Treasured collections and items may require specialized coverage. This is often the case for fine art, jewelry, vintage car collections, high-end mountain bikes, and other personal property that may exceed the standard coverage of a homeowner's insurance policy.

Similarly, exclusions are another common gap in insurance coverage. Many homeowners may think they are protected because they have home insurance, but events like floods, high winds, earthquakes, or wildfires may not be covered. Affluent homeowners with properties in diverse locations that face varying risks may overlook the need for these specialized coverages. 

Finally, a study found that 6 in 10 high-net-worth individuals and families overpay for their personal insurance coverage while being underinsured.  

In the aftermath of an accident or unexpected event, you don't want to discover that your insurance coverage is inadequate and that the financial burden falls on you. That's why at Marsh McLennan Agency Private Client Service; we recommend that our clients regularly review and understand their coverage with our team to avoid common pitfalls.

Taking proactive steps to ensure adequate coverage throughout the year, including on National Insurance Awareness Day, can go a long way in protecting yourself and your family from unforeseen hardships. If you'd like help reviewing your current policy for coverage gaps, please reach out. We can conduct an insurance review to help ensure you have the coverage necessary for your limitless lifestyle.