When most people think about financial risk, losing money is what they think about. Memories of the real estate investment or stock investment that didn’t work out as hoped may still be stuck in your mind.
But risk is much broader than just losing money, and the more money you have, the more likely it is that these risks are a part of your life.
Let’s start with your home. Is your home a magnet for the kid’s friends? Do you have a pool, motorcycles, bicycles, trampolines, dogs. … You get it. The toys that people with money have are known as an attractive nuisance. They are certainly attractive, but their inherent danger makes them a nuisance, and a potential liability.
Dogs, of course, have nothing to do with money unless your dog goes and bites someone. And if you are not properly covered for this peril, it can cost you a pretty penny to defend yourself against even a frivolous lawsuit. Make sure your umbrella liability insurance is adequate and that it will provide you protection for all of the risks that you can identify in your life.
What about a second home? Many with wealth own a second home in the mountains, near the water or in the desert. They all pose additional risks that you may not be prepared for. If the home is ever rented, even casually to friends and family, be sure that your insurance agent is aware of the rentals. If you add a boat, Jet Ski or other water or recreational toys, the risk multiplies as you may be responsible for any problems that arise from use of the toys.
Another reality of real estate is it needs to be maintained, and that means there will be painters, landscapers and all sorts of contractors floating around the property from time to time. Some of these contractors are well insured, and some are not. If you lean towards looking for the best pricing on your home repairs or maintenance, make sure that you are working with someone who can show you their certificate of insurance. I’d also check to see that all subcontractors that they involve have proper coverage including workman’s compensation for their helpers.
And the last issue that can raise your risk profile seems really unfair because it may arise from your benevolent involvement with charitable or community organizations. Unfortunately, even when you are donating valuable time toward a not-for-profit organization, you are exposed to liability.
John P. Napolitano CFP®, CPA, PFS, MST is Founder and Chairman of Napier Financial in Braintree, MA. Visit napierfinancial.com for more information. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Legal counsel should be consulted for specific advice or recommendations about any individual’s personal legal circumstances. Investment and financial planning advice offered through US Financial Advisors and Great Valley Advisor Group, Registered Investment Advisors.
