High net worth individuals have many responsibilities, but one that should be close to their hearts – protection of their assets from people who target the wealthy – sometimes does not get the priority it deserves.

A recent survey by ACE Private Risk Services of people with at least $5 million in investable assets demonstrated that most have not adequately protected themselves from threat of lawsuits that could be prompted by any type of accident involving their homes or other property – or even from volunteering on a non-profit board.

The Top Liability Concerns of the Wealthy

• Auto accidents: 47 percent
• Worker/household employee injury while on property: 31 percent
• Visitor is injured while on your property: 29 percent
• Being accused of misdeed or being held liable for incidents in connection with volunteer work: 22 percent
• Being sued as a result of a side business on your property: 19 percent

Lawsuits seek the wealthy

While many people face the same risks – auto accidents, employment liability, pets that might bite a visitor to the house – high net worth individuals are more likely to be sued in those situations and to be held liable.

Well-publicized lawsuits over the past several years have resulted in multi-million-dollar judgments against high net worth individuals. And laws allow lawyers representing the aggrieved to zero in on the wealthiest defendant in a suit regardless of whether that person is solely or only partially guilty of a civil offense.

Surprisingly the survey showed that a large percentage of wealthy do not have even basic insurance protection that could cushion large, unexpected settlements and very few have bought enough insurance to protect themselves from life-changing settlement amounts.

The importance of protecting assets

Even the wealthiest should ask themselves whether they could absorb a damage award of $20 million or more, and what it would do to their lifestyles.

With the proper insurance coverage, large payouts can be covered and financial catastrophe averted.

And while boosting the coverage provided by an insurance contract will increase the premium, there are ways to mitigate the annual payments. For instance, deductibles can be increased from say, $500 to $2,500. In that case, the homeowner is self-insuring against low-level threats in order to increase protection against catastrophic events.

Protection from an umbrella

While most affluent households have umbrella insurance to supplement the liability coverage in their homeowner policies, rarely do they have enough. 1 in 4 of the respondents in the ACE survey reported having less than $5 million in coverage.

The way to protect oneself from extremely high payouts is simple: an adequate umbrella policy. Most liability policies for home and auto do not exceed $500,000. An umbrella policy covers amounts above that, and the policy holder can decide how much to purchase. But remember, you are insuring against worst-case scenarios, not everyday outcomes.

Five common-sense steps when shopping for insurance

1. Seek an insurance agency that works with carriers that understand the needs of high net worth individuals, including a process for reviewing assets like finances, homes and lifestyle requirements.
2. Consider a substantial umbrella policy that would protect you from perilous losses.
3. Check to make sure your policy covers you for all eventualities. For instance, if you hire household staff, you need workers compensation and employment practices liability insurance. And any boards you serve on must carry protection to indemnify you from controversial or illegal actions.
4. Don’t skimp. Buy coverage that is equal to your current net worth and salary or other income.
5. Find a firm that will help you assess your risks by conducting a safety review at your home and recommend someone to conduct background checks on household employees. If you have driving-age children, of course it makes sense to ensure that they know safe driving rules. Every family member should understand the risks and dangers of posting information on social media.

High net worth individuals can expect to be targeted because of their wealth. Adequate insurance coverage is a way to protect them from the unexpected.