Gen X insurance: how to put proper midlife protections in place

If you’re a Gen X-er, it’s likely your life is starting to look very different than it did in your early years when you were just beginning your career and starting a family.  Now you’ve made significant headway in your career, earn a higher income, and have amassed significantly more wealth. Your children may be approaching the age where they can begin driving or they’re getting ready for college. You may also have acquired more luxury goods along the way. But what many individuals fail to account for amidst the hectic pace of everyday life is how their risks and insurance needs also change at this life stage.

Both major and minor life changes expose you to more risk; risk that needs to be mitigated to protect your families and your lifestyle from the unexpected.  A sudden loss of income, an unfortunate teen driving accident, or an injury sustained on your property could all threaten the life you have worked so hard to attain.

Adapting to change to mitigate risk

When life changes, so should the relevant components of your financial plan. In midlife, this often includes increasing or adding insurance coverage. We find that our clients benefit most from building a safety net with a combination of umbrella insurance, luxury goods insurance, and income protection insurance.

Umbrella insurance

Homeowners and auto insurance policies alone can leave large gaps in much-needed lifestyle coverage for high-income earners. Luckily, umbrella policies pick up where other policies leave off and lower your overall exposure to risk. An umbrella policy is an incremental policy that “sits above” your other policies in much the same way an umbrella protects you from the rain. Hence, the term “umbrella insurance.”

By definition, umbrella insurance is a form of personal liability insurance that is designed to cover potentially injurious or devastating accidents that fall outside the bounds of your typical homeowners or auto insurance. These types of claims could include bodily injury, personal injury, property damage, and landlord liability.

These “catch-all” policies are especially beneficial for high-income earners who are often more susceptible to legal claims or judgments.  Low-probability high-magnitude events (like an at-fault car accident) can wipe our decades of wealth accumulation if you do not have insurance in place.  An added bonus is that they often cover not only yourself but the other members of your household including your teen driver(s) and your spouse. Be sure to review your individual policy to see what is covered, for how much, and what may be excluded.

Luxury goods insurance

Many individuals make the mistake of believing that their luxury items such as expensive jewelry, gold, antiques, art, and collectibles are protected under their homeowners insurance; however, homeowners insurance typically only offers limited coverage up to a certain dollar amount. So if a diamond falls out of your wedding ring or a storm destroys art you’ve collected in your travels, you may be at a loss when it comes to replacing the value of these items.

You’ve worked hard to be able to enjoy the things you’ve acquired, so why put the fruits of that hard work at risk of loss, theft, damage, or destruction? Of course, we know that some items of sentimental value cannot be replaced (or artwork recreated), but at least some of their financial value can be recouped and reallocated elsewhere if they are fully covered by insurance.

Income protection insurance

Income protection insurance, also known as disability income insurance, serves to guard against the depletion of your savings or selling off invested assets to replace your income should you lose your job or become temporarily or permanently disabled. While this type of insurance typically does not cover the exact amount you were earning, it is designed to bridge the gap in your rehabilitation period. Most individuals can expect to receive anywhere from half to two-thirds of their regular income, depending on the policy purchased.

Take control of new midlife risks

As the COVID crisis has made strikingly clear, there are circumstances and events in our lives that are completely out of our control. In some ways, it has forced us to think about how to better manage the things that are within our control. For mid-lifers, increasing insurance coverage can help to do just that. So even though we can’t control what will happen the first time our child pulls out of the driveway solo or how economic conditions will affect our business’s revenue stream, we can put safety measures in place to protect against unforeseen circumstances that could unravel our plans.

Important note: Please consult an insurance professional to determine the right fit for your needs. We provide this information for educational purposes to help protect you and your family against catastrophic loss.