January 15, 2016
NASDAQ
With permission I reprint an article that I wrote and posted for Nerdwallet that was picked up a few other media sources such as Nasdaq.
Auto Insurance for the Rich Often Covers and Costs More
It may be surprising, but your level of wealth can impact your car insurance coverage needs, and a standard policy may not be the best way to protect yourself.
What’s so special about auto insurance for the rich? Many affluent individuals need coverage that focuses less on property and more on liability, for instance. Such coverage, offered by high-end carriers that specialize in working with wealthy clients, differs in several key ways from standard auto insurance. These auto policies tend to come with:
1. Higher deductibles
High-end insurers are not likely to offer deductibles as low as $500, and certainly not as low as $250 or $100. Typically, they start at around $1,000.
By cutting out the lower claims, high-end insurance providers save money for themselves and their clients. With higher deductibles you are in essence self-insuring (paying out of pocket) for a greater portion of any given loss. You are less likely to file lower-cost claims, which frees up your insurance company to focus on the mid-level and larger claims, the real insurance need for affluent individuals.
2. Higher general liability limits
The auto insurance industry is in a state of flux. One area undergoing major changes is the caps on maximum coverage for bodily injury and property damage. Previously, the highest you could go with most preferred carriers was about $500,000, but some carriers will now cover you for up to $1 million for bodily injury and $300,000 for property damage.
High-end carriers, on the other hand, have offered these higher limits for years. While you drive down the road, ask yourself if you have enough property damage coverage to replace your neighbor’s new Tesla. Most of us probably don’t. But in wealthy areas, having this much coverage could be a very good idea.
3. Higher uninsured limits
For the wealthy, uninsured motorist coverage can prove to be a godsend in the event of a horrible, life-changing accident. In general, you can take your uninsured motorist coverage only as high as your bodily injury limits. The more money you make, the more coverage you potentially need, because standard insurance carried by another driver may not cover your higher expenses. And that’s before you consider an accident with a completely uninsured driver. Affluent families may want to consider upping their coverage even further with their umbrella policy.
4. Coverage abroad
Wealthy clients won’t necessarily ship their own Porsche to Paris for the weekend, but international coverage can come in handy when you rent a car abroad.
5. Stated value clauses
In a stated value auto policy, you and the insurance provider agree on the value of your vehicle when you accept the insurance policy. If the car is totaled, you receive that amount, instead of the usual current market value.
6. Higher rental car reimbursements
If you are accustomed to driving only luxury sports cars and your Lamborghini gets totaled, how are you going to rent a replacement for only $30 a day? The answer is, you are not. With this option, you may have sufficient coverage to rent another sports car.
Paying the premium
Aside from these variations in coverage, the cost of such affluent insurance is another major difference from standard auto coverage. As you can imagine, policies for wealthy individuals, with higher limits and other perks, cost more than standard auto insurance.
So if you are looking to save money on your auto insurance in the short term, you probably don’t want a policy from a high-end carrier. But if you have a sizable net worth, it could be a different story. In that case, what is more expensive in the short run could potentially save you a bundle in the long run.
You may also read the same article on the nerdwallet site.
Please read our disclosure. Reading about insurance is not a substitute to speaking with a licensed broker.
