Personal Risk Management: Protecting What Matters Most

Your position as an executive comes with a number of unique risks to both financial security and overall well-being. Take steps to understand the areas of concern and associated means of protection.

At some point during your career you likely developed a key strategy to shield your company from an identified threat. Perhaps you were brought in to devise a plan to bring your company back from the brink. Or maybe you established policies to thwart a data breach. Now turn to your life and family. What safeguards do you have in place to adequately protect your family and assets in the event of a loss? 

You may have more to protect than you realize. Take a step back to broadly consider your assets:

• Future earnings
• Health and well-being
• Investments
• Primary and vacation homes 
• Automobiles, watercraft and recreational vehicles
• Collections, jewelry and antiques

Below we discuss various ways you can protect yourself and your family.

Interruption of Earning Ability

If your income suddenly vanished or was drastically limited – due to a health emergency, permanent disability or death – how would the loss impact your family? Income inflows may be interrupted suddenly, but expenses and lifestyle standards continue. A substantial accumulation of wealth may be drained with the loss of income for an extended period. For this reason, it is imperative to obtain appropriate levels of disability insurance and life insurance.

Disability insurance will replace a percentage of your income when you are unable to work, and may be company-sponsored or individually purchased. If an individual disability income policy is purchased, benefits will be in addition to company plan benefits for which you are eligible. If you have several earning years ahead of you, evaluate what your company offers and explore the benefits of an individual policy that will follow you if you transition to a new company. Most policies pay benefits until the insured is 65 years of age.

On its face, life insurance is a straightforward protection against an obvious risk. While many wealthy families may choose to self-insure, life insurance can provide an additional safety-net. Life insurance proceeds may be utilized to settle outstanding debts and care for family members in a manner in which they are accustomed. For a sizable estate, it is useful to have life insurance to cover federal estate taxes so that liquid assets do not need to be depleted or personal assets sold to raise cash to pay a tax bill. With proper planning, the ownership of life insurance may be structured to exclude policy proceeds from the taxable estate at death.

Health and Well-being

As the saying goes, “health is wealth.” The two are inextricably woven, yet people often under-appreciate how dependent financial wealth is upon physical well-being.

Health insurance is often taken for granted, until a major medical emergency occurs. Beyond basic coverage questions, consider access to the health professionals of your choice, on your schedule, wherever you are in the world – not only for you, but for your family. The choices and decisions include concierge health services, travel health insurance, and benefits for children as they go off to college and begin their independent travels across the globe.

Long-term care insurance is frequently overlooked. With life expectancy rising alongside the likelihood of need and cost of long-term care, it is becoming more important to project future expenses and make an informed decision whether to self-insure or purchase insurance for long term care needs.

Personal Liability

High profile careers and a robust balance sheet come with increased exposure to personal legal liability. The scenarios are varied – a caregiver in the home is injured, a friend using the jet-ski at the lake has an accident, a renter at the vacation house slips and falls. Accidents and injuries happen, claims are made, litigation is initiated. Standard insurance is not designed to protect against such a loss.

Consider how intentional asset ownership and insurance may minimize personal legal liability risk exposure:

• Hold title to vacation property with mixed personal and rental use in a limited liability company .
• Title a residence in “tenancy by the entireties” with a spouse to insulate the home from certain claims .
• Maintain adequate liability insurance, using a high-end carrier.

Based on your potential exposure to third-party claims, regularly evaluate available asset titling and insurance coverage levels to determine sufficiency, identify gaps and proactively manage these potential exposures.

Property and Casualty Loss

Typically, property and casualty insurance will cover real property and certain personal property. Oftentimes damage as a result of flood or certain natural disasters is excluded. Be certain to understand coverage limits and exclusions to determine whether supplemental coverage is necessary to protect your residences. Likewise, ensure that the proper entities and individuals are the named or additional insureds. For jewelry, art and other collections, secure the requisite appraisals and coverage. You may also want to consider liability protection for an added layer of protection.

Boards

Directors, trustees and officers of corporate and not-for-profit boards act in a fiduciary capacity. Prior to accepting board appointment, determine what protections the bylaws extend and the specific directors and officers (D&O) insurance the company or charity carries. In addition, although the organization may offer you coverage under its D&O policy, it may be wise to expand coverage of your personal liability insurance policy to protect your assets from claims that may arise as a result of your service. In line with best practices, it is wise to secure appropriate approvals and reporting through your company’s legal team to ensure compliance with corporate disclosure and compliance policies.

Financial Fraud and Cybersecurity

As criminal masterminds and hackers forge ahead to defraud individuals and companies through cybercrimes, those with substantial wealth are often targeted. Your risk is heightened if you are an executive of a public company that is required to report earnings and compensation details. Even executives of private companies are at risk for cybercrimes due to their stature. Protect your access to technology from compromise by cyber extortion, which may threaten the use of your electronic device or release of personal information in exchange for ransom. Analyze your cyber vulnerability and consider obtaining a supplemental cybercrime policy to reimburse you for financial loss and fill any gaps. Depending on your wealth and public profile, you may desire to engage a private security firm to assess your need for cyber and personal protection services.

Next Steps

• Inventory your assets and assess unique aspects of your lifestyle to identify risks and determine when to put insurance in place.
• Explore various forms of asset ownership to take advantage of the liability protections offered by the proper titling of assets.
  Ensure the proper party is covered – you, your partner or child. For example, property may be titled in trust, resulting in an insurance policy identifying the trust as the policy owner. In the result of loss to a third-party, if you are found liable or deemed responsible, you may not be covered.
• After insuring physical assets, acquire excess liability coverage.
  This provides an additional layer of security to protect your assets from uninsured parties, domestic staff worker’s compensation claims or a lawsuit due to an unforeseen event in which you are held personally liable for damage to personal property or bodily injuries.