High net worth car insurance is very different than it is for consumers in the mass market. HNW drivers sometimes (but not always) drive more expensive cars than the typical middle class consumer. And high net worth drivers obviously have more to protect.
But many very successful affluent and high net worth drivers come to us having made some mistakes in their high net worth car insurance.
Common mistakes include:
- Working with an inexperienced or captive insurance agent.
- Deductibles that are too low
- Insufficient liability coverage
- Lack of excess liability (umbrella) insurance
- Lack of commercial coverage on vehicles used for business
Work With the Right Insurance Agent.
Car insurance in the high net worth and nonstandard risk segments requires a more experienced insurance agent. HNW car insurance and specialty car insurance involves a lot of advanced underwriting. You also may need access to specialty insurance carriers that understand the luxury, high-performance, antique, or exotic car market.
Not every agent gets it! And many agents don’t even have access to the specialty insurance carriers you need, who have underwriters with the automotive knowledge you need, and access to the insurance tools you need to design coverage appropriately for you. For example, you may need a custom-designed policy that takes into account a lot of expensive modifications to your car, or that assigns your car an agreed-upon value that may even go up over the years, rather than one that assumes your car depreciates according to a mass market schedule.
Also, as an affluent/high net worth customer, you need an insurance agent with a broader perspective, with the experience and insurance industry knowledge it takes to integrate your car insurance with your overall asset protection plan, to include coordinating your policy with other liability policies.
Carry Higher Deductibles.
That first few thousand dollars of insurance is the most inefficient and expensive. But too many wealthy and high-net-worth families have absurdly low deductibles, given their incomes and available assets.
But high net worth people… or even a moderately successful plumber… should be able to write a check for $1,000 or $2,000 without wincing too much about the money.
The principleof the thing, maybe, but not the money!!
If you wouldn’t file a claim on an $1100 fender bender to avoid getting a premium increase, it doesn’t make sense to pay extra for a low deductible of $500 or $1,000.
Maybe you don’t even carry collision coverage at all, if it’s just your running-around or commuter car.
The most cost efficient strategy is to carry the highest deductible you can reasonably afford. Whatever money you’re paying for car insurance, focus those dollars on buying the coverage you really need:
- Liability
- Personal injury protection (PIP)
- Medical payments coverage
- Uninsured/underinsured motorist coverage
- Poor policy design on high-value, exotic, collector, or modified cars
If you’re an affluent, wealthy, or high-net worth driver… or you’re just driving high-value cars for the love of it, here are several advanced car insurance tips. So you can be sure you’re getting the car insurance coverage you really need.
Own an Umbrella Policy.
Supplement and backstop your auto liability limits with a good excess liability (umbrella) policy. You can buy these in million dollar increments from $2 million up to $5 million easily.
Yes, umbrella coverage will pick up where your car insurance leaves off. If you have $300,000 in liability insurance, and you’re involved in a wreck that causes $1 million if injuries or a wrongful death to a third party (this happens all the time!), your umbrella policy will pick up when your car insurance liability limits are exhausted.
Not only that, but a single umbrella policy will protect you against a wide range of other hazards, too – from slip and fall accidents on your sidewalk to dog bite claims to social host liability if someone leaves your Christmas party drunk and causes a wreck to a libel or slander claim after you leave a negative Yelp review on that crab restaurant that gave you food poisoning liability caused by your knucklehead teenage stepson.
Yeah, you know who you are.
Any of these risks could and have resulted in million-dollar+ judgments and settlements.
An appropriate auto liability limit given your assets potentially at risk, in combination with an umbrella liability policy, is a vital element in any affluent or high-net-worth individual’s wealth protection strategy.
Structure Coverage on High-Value Cars Appropriately.
If you own luxury or high-performance cars, exotic cars, hot rods, RVs, or any other high-value vehicle. you shouldn’t just buy the standard “off-the-shelf” car insurance policy from a general entry-level car insurance agent at a Big Company call center. Or your local captive strip mall agent (though if they already have your home insurance you might be able to get a good value on an umbrella policy from them!)
High value cars need to be insured very differently from your cousin’s 2012 Dodge Caliber.
For starters, a properly cared-for collectors car or hot rod won’t depreciate in value like your cousin’s four-wheeled shameful embarrassment to the U.S. automotive industry. In fact, if you don’t drive it a lot, and you take care of it, it will probably go up in value.
But a standard form car insurance policy you buy from a gecko won’t take that into account.
So you could wind up vastly underinsured in case of damage to your car.
A better solution: Buy an agreed value policy. Most car insurance policies pay the actual cash value of a car, after they apply a standard formula for depreciation. But if your car doesn’t depreciate in value but appreciates, you want a policy that recognizes that.
You should also have a policy that guarantees they’ll pay for repairs with original manufacturer parts. Not crappy Chinese knockoff and counterfeit parts.
You might also want a rental car replacement provision. So if you do lose the use of your car while it’s being repaired, they’re not going to stick you with something embarrassing. Like one of those #&#^@ing Ford Eco Sports.
Insure commercial vehicles appropriately.
Most of our high net worth clients own businesses. That’s how most people become high net worth in the first place!
If you use your vehicle for business purposes, though, you need to look carefully at how your the titling and car insurance is structured.
Is your car a business asset? Or should it be treated as one?
Who will drive your car?
Will you have employees drive your car regularly?
Will these drivers be your personal domestic employees? Or will they be employees of a corporation or LLC that you own?
Do you have appropriate separation between your personal and corporate assets? This preserves the limited liability features of your corporation(s) or LLC(s).
Otherwise, you could accidentally expose your personal assets to trial attorneys.
Is your insurance sufficient to protect your corporation or LLC’s assets against a possible judgment or settlement?
Consider Coverage for Stereos and Other Non-Original Systems and Parts.
Like your tunes? Make sure your policy has a rider or endorsement for unlimited or agreed value for your stereo and other added components.
Otherwise, if your stereo gets stolen, your policy will only cover the stock model the manufacturer used when they installed your system so they could listen to their Christopher Cross and Foreigner cassettes.
Don’t Skimp Uninsured/Underinsured Motorist Coverage.
This is a frequently overlooked gap in coverage when it comes to HNW car insurance customers:
Depending on your state, as many as 29.4% of the other drivers on the road are completely underinsured.
A large number of the others have only the state minimum liability coverage, because that’s all they can afford.
If one of them causes an accident and you’re injured, you could suffer a severe financial setback.
Sure, you can probably afford to repair or replace the car. And your major medical insurance will probably cover most of your hospital bills.
But neither your car insurance or your medical insurance will cover lost income, damage to your business, long-term nursing home care, or compensation for pain and suffering.
And the uninsured/under-insured driver doesn’t have the resources to cover it. Not even close.
That’s why high-income or HNW car insurance policies should include substantial coverage against uninsured and under-insured drivers.
The Bottom Line
If you’re a high-net worth individual, with assets to protect, and some valuable vehicles, you need an experienced car insurance expert. Not your local captive generic insurance agent who just sells the plain vanilla basic coverage. You should work with someone who understands non-standard risk insurance and underwriting, and how to design coverage for your specific situation.
If you are in this situation and you haven’t taken steps to upgrade your coverage to reflect your specific circumstances, give us call today at (855) 438-7353.
Or if you prefer, you can fill out our online form here.
Include as much information as you can about your car and any modifications or special considerations to it, and we’ll be in touch!
See you on the road!
Steve “Mr. Insurance” Ludwig
CEO, Select Insurance Group
For Further Reading
Montana LLCs and High-Value Car Registration: What You Need to Know
Car Insurance For Custom Cars, Modified Cars, and Hot Rods
Insurance For Exotic Cars, Sports Cars, Collectible Cars, and Antiques
