August 20, 2020

The Countdown: Liability Insurance Buying Guide for Affluent Families

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Craig Rice worked for several years as an insurance broker serving private clients in the FL region. Now he supports agents as a business development manager for Vault. Craig says that some of his most important advice is to make sure you have adequate umbrella liability coverage. One lawsuit, he explains, can wipe out a family’s wealth for a generation. Here he offers ten things to keep in mind as you consider liability coverage to protect you in the event of a lawsuit:

4 signs you may be at higher risk for lawsuits

Anyone successful can attract tort lawyers, but targets often share certain attributes.

  • Life in the spotlight. An actor, athlete, Instagram influencer, or anyone else who attracts attention will also draw more than their fair share of lawsuits. That’s also true for lawyers, doctors and other professionals or entrepreneurs who are prominent in their community.
  • Teenagers who drive. Some courts have found additional liability for parents who let kids with previous accidents keep driving.
  • A penchant for parties. Hosting frequent events at home not only attracts attention, it also brings in many guests and workers who could be injured amid the reverie.
  • Potentially dangerous hobbies. Whether you like swimming with sharks, climbing mountains, deep sea fishing or ATVs, you’re putting more than yourself at risk. If something goes wrong, you could hurt your support team or an innocent bystander. Even a wayward golf ball could chip someone’s tooth and prompt a lawsuit.

3 considerations when choosing a coverage amount

Your core protection from lawsuits is an excess “umbrella” liability policy that covers you above and beyond the personal liability limits on your auto and homeowners policies.

  • Your assets. Start by looking at your net worth. Any tort lawyer certainly will.
  • Your future earnings. If you are young or in any situation where it looks like your income and wealth is increasing, a court could well award someone damages that exceed your current net worth that you will pay out over time.
  • Your appetite for risk. If you have the means to absorb a loss, you may choose to limit your insurance coverage and roll the dice. But then again, you might decide you’d be more comfortable with insurance in place to cushion any unexpected blows.

2 additional coverages you might need

Depending on your lifestyle, you may need to buy additional coverage separately or through your umbrella liability policy.

  • Directors and officers (D&O) liability. As a board member of a company or nonprofit group, you can be held personally responsible for the negligent actions of the organization you supervise. These entities should have their own D&O policy, but often the coverage is not sufficient and would not be enough to shield you from a large lawsuit.
  • Employment practice liability (EPL). If you’ve got a nanny, housekeeper, or a larger household staff, you could be sued for wrongful termination or discrimination.

1 big mistake to avoid

For families with complex finances, the amount of insurance isn’t as important as it’s structure.

  • Forgetting to insure properties held by legal entities. Say you have six homes, and each is in the name of a separate LLC for tax or privacy reasons. Well, those homes may not be covered by your personal umbrella if you haven’t added the LLC names to the policy. Details matter.


Another mistake to avoid? Assuming that all insurance companies and policies are the same. Ask your agent which insurers are driven by internal procedures and which go out of their way to serve clients and make dealing with something like a lawsuit as easy as possible. At Vault, we are firmly in the second category.


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