In March 2017 I wrote that, as a rule of thumb, you should carry liability insurance equal to your non-exempt assets plus five to ten years of income. Suppose you have a home, an IRA, a modest checking account, and $300,000 in CDs. The home and IRA are exempt from creditors’ claims. The CDs are not. That suggests at least $300,000 in liability insurance. If Social Security and IRA income total $50,000 a year, another $250,000 to $500,000 in liability insurance is indicated. Even someone of modest means may want $500,000 to $1 million in liability insurance.

In April I started getting the calls: “I asked my agent for a $5 million umbrella policy, and he won’t give it to me.” “My agent wouldn’t tell me how much insurance I really need.” “My agent says I probably have enough insurance.”

These answers make sense. An insurance agent is not your agent; they are an agent for an insurance company, which limits the umbrella policy the typical agent may offer to $3 million. Larger, much larger policies are available, but not from this agent.

Insurance agents do not have a duty to advise, and are not obligated to inform the insured that coverage is inadequate or overpriced. The second agent, who refused to state whether coverage was adequate, knew his or her limits and communicated them honestly. The third agent, who told the client their insurance was adequate, was unusual. Most agents will not express an opinion.

My clients are low risk but high net worth, often $2 to $7 million, and are best served by an insurance analyst, sometimes called a private risk manager, that can be more proactive.

An insurance analyst tends to be an independent agent, representing several insurance companies. Professional designations are common, e.g., Chartered Property Casualty Underwriter (CPCU), Certified Insurance Counselor (CIC), Associate in Risk Management (ARM), or Certified Risk Manager (CRM). Insurance analysts carry errors and omission insurance, in case of loss to the client caused by their negligence. The profile client has an expensive home, domestic employees, watercraft, a farm or ranch, art or other collections, or alternate ownership structures (trusts, LLCs, family limited partnerships).

Like “mere” agents, insurance analysts’ compensation comes exclusively from the insurer. However, the competition for wealthy clients, access to multiple insurers, and the greater overall compensation per client leads to fuller disclosure, more robust advice, and better if not cheaper insurance.

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