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 Sometimes the question is asked, why do the very rich purchase insurance?  What sense is there in buying an auto insurance policy if you can simply replace the corner of the city block you ruined out of pocket?  Why would a rich person put up with health insurance companies if he could simply pay the doctor himself?

This seems like common sense to the working class world, but the world of the rich is very different.  Firstly, their very status puts them at much greater liability. If someone knows they have been hit by a rich person’s car, their torts will probably be much more aggressive, requiring the rich to carry a much higher liability limit than they would otherwise.  They are also much more likely to be liable, and for much greater faults.  Most of the rich carry malpractice or employer insurance to protect themselves if an accident befalls a client or employee in the workplace.  They also tend to involve themselves in a number of deals that require special insurances that would most of us don’t have to bother with.

Due to the fact that they are often in high-ranking corporate positions, they may be legally required as CEO’s and stockholders, to have health insurace which, due to company policy, is likely available to them very readily, and would not justify any “savings” of self-insurance.

As for their car insurance, an apt question might be, which car?  Given that many a wealthy person could consider himself a collector, car insurance becomes a different game for the upper income brackets.  In order to be eligible for secondary coverage, they will probably bundle their car or cars with an original policy to save money.  If they have vintage cars that serve as collector pieces or investment vehicles and primarily housed indoors and wish to have collector car insurance, they will have to first show proof of primary car insurance as well.

The rich also often purchase what is known as “umbrella insurance,” or one-size-fits-all extra coverage that supplements business, auto, health or liability insurance in the event that payment takes them past their insurance maximums.  This typically involves a fair amount of bundling, which makes the insurance of many items that would seem otherwise pointless practical.

This Financial Services article was written by Mark Karavan on 10/14/2009

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