Five ways homeowners may be putting their wealth at risk

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Primary and secondary residences and their contents can represent a large portion of someone’s assets. Financially protecting these assets starts with incorporating them into a more significant financial strategy to examine whether there are any gaps or issues, such as insufficient insurance coverage.

Here are five common mistakes homeowners make that could put their wealth and well-being at risk.

1. Insufficient Liability Insurance

Many homeowners carry umbrella insurance policies, but these may be insufficient if they do not match the homeowner’s net worth. If your net worth exceeds your liability coverage, you could be at significant financial risk in the event of a lawsuit. To protect against potential losses, ensure that your umbrella policy covers either the entirety of your attachable assets or your net worth if minimal planning has been done.

2. Lack of Cohesive Coverage on Multiple Properties

Homeowners with multiple properties, such as primary residences and vacation homes in different states, should ideally maintain cohesive coverage under one high net worth insurance provider. This ensures comprehensive protection and can reduce costs. Without coordinated coverage, valuable properties may be excluded from certain policies, creating exposure to significant losses in case of an incident.

3. Not Listing Trusts or LLCs on Policies

High net worth individuals often use trusts or LLCs for estate planning, transferring ownership of homes to these entities. However, failure to list these entities as insured parties on homeowner or umbrella policies can lead to gaps in protection. Suppose a property held in a trust or LLC is not adequately insured. In that case, the owner may face substantial personal liability in case of an accident or lawsuit related to the property.

4. Inadequate Coverage for Unique Home Features and Building Materials

Historic or uniquely constructed homes often require specific coverage. Standard homeowner policies might need to account for high-cost materials like marble or rare wood, which can be significantly more expensive to replace. Using a high-value insurer who understands these materials helps ensure proper coverage. Otherwise, a disaster could leave homeowners paying large sums out of pocket to restore their properties.

5. Insufficient Insurance for High-Value Assets

Homeowners with valuable art, wine or jewelry collections frequently assume these items are fully protected under standard policies. However, they often require specialized coverage. Personal property coverage on basic homeowner policies may need to be revised, exposing collectors to losses. Scheduling each item individually with accurate appraisals ensures these assets are adequately covered, often with no deductible, and provides compensation for their total value in case of loss.

In Conclusion

Protecting your home and valuable assets requires more than basic homeowner insurance. Assessing potential gaps in your coverage can help you safeguard your wealth and avoid financial setbacks. Regularly evaluate your insurance needs, consult with professionals and ensure comprehensive protection for your residence and prized possessions. Proper planning today can prevent costly oversights in the future.

Thomas M. Dowling, CFA, CFP®, CIMA® is the Head of Wealth Management at Alliance Global Partners of the Lowcountry on Hilton Head. He can be reached at infohh@allianceg.com or (843) 420-1993.