A Costly Mistake Wealthy Investors Make

Imagine this: you’ve spent years building wealth, investing wisely, and growing your net worth.  Then, in an instant, it’s gone; not because of a bad market, not because of reckless spending, but because of poor insurance planning.

For many high-net-worth individuals, insufficient insurance coverage is one of the biggest financial risks they unknowingly face. They accumulate wealth, acquire valuable properties, and enjoy an elevated lifestyle, but don’t take the time to adjust their protection to match their growing asset value.

Here’s how to avoid that mistake and make sure your wealth is truly safeguarded.

Is Your Home Insurance Actually Enough?

Most people assume their home insurance will cover the totality of a loss in the event of a disaster. However, if you didn’t adjust your coverage as your house value rose, you could be severely underinsured.

The recent California wildfires have unfortunately reminded us that even multimillionaires can lose everything overnight due to lack of insurance. Take the case of a homeowner who spent $27 million on their residence yet had only $3 million of coverage. The house was completely destroyed in the wildfires, leaving the owner with just a fraction of what was needed to rebuild.

This is a common and costly oversight. Many policies don’t automatically adjust for soaring real estate values, rising construction costs, or major renovations. Before disaster strikes, ask yourself:

✔ Has my policy been updated to reflect my home’s current value?

✔ Does it account for renovations, additions, or new purchases?

✔ Will it cover rising rebuilding costs?

The harsh truth is that insurance doesn’t automatically increase as home values rise. If you haven’t reviewed your coverage in years, you might be unknowingly self-insuring your own property.

When Did You Last Review Your Life Insurance?

The more you earn, the higher your expenses become. Unfortunately, many people never update their life insurance policies. Ask yourself:

• Would your family be able to maintain their lifestyle if something happened to you?
• Does your policy account for higher home values, education costs, and lifestyle inflation?
• Are you relying on an old policy that was meant for a time when you earned significantly less?

Life insurance should scale with your wealth. As your income, assets, and responsibilities grow, your policy should be adjusted to ensure your family is truly protected.

Don’t Overlook Disability Insurance

Doctors, lawyers, executives, and other high-income earners often rely on one key thing: their ability to work. What happens if an accident or illness prevents you from earning?

Many high earners neglect disability insurance, assuming they’ll never need it. But the reality is that a long-term disability can be just as financially devastating as an unexpected death. If you’ve significantly increased your income but haven’t updated your disability insurance, your coverage might only reflect half of what you actually need.

For professionals who have spent years building a career and lifestyle around their earnings, losing the ability to work can be financially catastrophic without the right protection in place.

Asset Protection Beyond Insurance

Beyond traditional home, life, and disability insurance, there are other ways to safeguard your wealth:

• Umbrella insurance. Provides extra liability coverage beyond home and auto insurance, protecting against lawsuits that could wipe out personal assets.
• Business insurance. If you own a company, you need liability, key person insurance, and property coverage to safeguard against risks.
• Estate planning. Properly structuring your assets in trusts can protect them from creditors, legal disputes, and unexpected claims.

Wealth Alone Doesn’t Protect You — Smart Planning Does

Many investors focus on growing wealth but neglect protecting it.

✔ Review your home insurance: ensure coverage reflects today’s reality.

✔ Update life and disability insurance: your family should be truly protected.

✔ Regularly reassess your policies because as your life changes, your coverage should, too.