Sometimes you spot a larger problem than the one at hand.
Recently, a client asked whether he should accept a loss payment from his insurance company. The gentleman, a Wall Street financier, had three (!) Masereti’s on his policy with a total stated value $450,000. His car collection was destroyed in a fire. We determined that he should accept the insurance company’s offer of the full $450,000.
However, after solving this problem I found a disaster waiting to happen. Shockingly, this very wealthy man, who fully insured the value of his car collection, was grossly underinsured for liability and personal coverages. He carried only $25,000/$50,000 for bodily injury, $50,000 for property damage, and $50,000 uninsured motorist.
On the bodily injury liability limits, the client’s personal wealth would be at enormous risk in the event that he were sued for a motor vehicle accident involving very serious injuries. For example, if he were negligent and struck a pedestrian who sustained two fractured legs, surgeries, and an inability to return to work, the maximum limits of $25,000 would be grossly inadequate. This client’s considerable personal wealth would be at risk for a judgment above the $25,000. It would have been far less expensive for the client to have carried much higher limits than have to pay-out of his own pocket an amount in the hundreds of thousands.
I recommended the following:
- Increase the bodily injury limits to the maximum available, and then get an umbrella policy of $2,000,000. A high wealth individual should carry insurance on a par with this wealth. The $25/50 limits that he carried is suitable for a low paid worker without much wealth.
- Increase the property damage to at least $100,000. A fender bender at one of his antique car shows could be quite expensive. We have had cases where a driver loses control, collides with a house or storefront, and causes extensive property damage. Again, his objective is to protect his personal assets.
- Increase the uninsured motorist coverage to at least $1,000,000. This protects the client in the event that he is very seriously injured by another driver who has insurance limits less than his own coverage.
I recommend that our clients annually review their insurance needs with their insurance agents. Make sure that you have adequate insurance to protect your personal assets, such as your home, bank accounts, retirement accounts, and personal property.
If you have an insurance issue or dispute, please feel free to call me at 800-581-1434 or write to firstname.lastname@example.org.
Mark E. Seitelman, 8/27/09, www.seitelman.com.