On Monday, May 20, 34-year-old professional gambler James Holzhauer won $89,229 on his return to “Jeopardy!” following a two-week hiatus from regular play. He won another $86,905 on Tuesday, May 21 and set a series record for highest per-game winnings average: $77,798. Holzhauer is the biggest single-game cash winner – $131,127 – and second-biggest overall winner in the show’s 40-year history. As of press time, his streak stands at 24 wins and $1,867,142 in prize money. Holzhauer is close on the heels of Ken Jennings, who amassed over $2.5 million during his 74-game winning streak in 2004—the longest in ‘Jeopardy!’ history.
There is no telling what the future will bring, but Holzhauer’s newfound wealth and fame will be life altering for him, his family and others who benefit from his windfall. The Naperville, Illinois native has already donated some of his winnings to organizations in his current hometown, Las Vegas: the Las Vegas-Clark County Library, where he borrowed children’s books to augment his subject-matter expertise; the Las Vegas Natural History Museum; and the Ronald McDonald House. He also reportedly plans to travel with his wife and purchase gifts for his family members, including U.S. Open tickets for his father.
“When your net worth and wealth changes overnight, in addition to it being broadcasted by the media in this case, you are considered a high profile individual.” — Kate Wright, Burns & Wilcox
Holzhauer has only just begun to grapple with his new financial status. According to experts, he will have to navigate some of the common pitfalls of coming into new wealth. Psychologist Stephen Goldbart coined the phrase “Sudden Wealth Syndrome” to describe this specific constellation of shifting anxieties, needs and priorities along with awareness of new risks. A 2018 report from Montreal-based BMO Wealth Management examined the effects of this syndrome, well known to those acquainted with the story of a Montreal family whose lottery fortune led to ruin and tragic loss. The report noted that while the pressures, uncertainties and vulnerabilities associated with sudden wealth can be overwhelming and spur poor decision-making, the outcome can be favorable if appropriate steps are taken to manage the abrupt change in circumstances.
“When your net worth and wealth changes overnight, in addition to it being broadcasted by the media in this case, you are considered a high profile individual,” explained Kate Wright, Regional Practice Group Leader, Personal Insurance, Burns & Wilcox, Indianapolis, Indiana. “These individuals are easily recognized due to the media attention and can be a target for kidnapping or home invasion as well as frivolous lawsuits, libel, slander claims, extortion—these are all things that you are at a greater risk of experiencing when you are considered high profile.”
Common perils of sudden wealth
Newly affluent individuals can also fall into the trap of purchasing expensive items and not protecting them. Sometimes this combination can be disastrous; statistics show this is not uncommon among athletes who experience a surge in wealth. Two years into retirement, 78 percent of former professional football players are bankrupt or under severe financial stress, and an estimated 60 percent of former professional basketball players are broke within five years of retirement.
No matter how someone receives a sudden influx of cash, financial advisors recommend setting a financial strategy, seeking professional tax assistance and looking for experienced financial advice—this includes contacting an experienced, knowledgeable insurance broker or agent.
Protection is available in many forms and combinations
Given the wide range of exposures that come with sudden wealth, including personal liability, property, kidnapping and more, securing a Personal Umbrella Insurance policy is an important first step, advised Sarah Chandonnet, Underwriting Manager, Private Client Practice, Burns & Wilcox, Detroit/Farmington Hills, Michigan. “A lot of times the coverage given on certain policies is not enough,” she explained. “A Personal Umbrella Insurance policy will pick up the coverage that is not included on the Homeowners Insurance or the personal auto insurance policy.” Chandonnet added that a sudden, major change in wealth can leave clients with exposures they are unaware of.
“Given the wide range of exposures that come with sudden wealth…securing a Personal Umbrella Insurance policy is an important first step.” — Sarah Chandonnet, Burns & Wilcox
While a Personal Umbrella Insurance policy is an integral part of any strategy to manage wealth, sudden or otherwise, other coverage may be necessary. When individuals first come into money they may go on buying sprees, and what they purchase can vary widely, ranging from a soft-close toilet seat — the first thing purchased by a recent $1 million Euromillions lottery winner — to million-dollar homes and cars. For many, sudden wealth gives them means to consider purchasing big-ticket items like rare cars, jewelry or even yachts. For this high-end merchandise, new insurance may be necessary.
“If you are buying the new hottest exotic car, it may require a specialty auto insurance policy,” Chandonnet said. “People who come into new wealth often purchase items they may not be familiar with buying.” Chandonnet recommended seeking guidance from an experienced insurance broker or agent to determine the appropriate policy types and limits needed to achieve comprehensive coverage.
Collector Cars Insurance may be needed to protect a rare car, while a Personal Articles Floater (PAF) policy may be advisable to safeguard collections of artwork or jewelry. A PAF policy could be the best means of securing unique valuables that are kept or gifted to others, Wright added.
Big-ticket items have a higher replacement cost than typical purchases and many carry additional risks. Boat owners, for instance, must consider how to best mitigate exposures of the watercraft, passengers, and property damage that can arise. Depending on the needs and circumstances of a given boat owner, a specialty Recreational Marine Insurance carrier consultation could be advisable, Wright explained.
Experienced brokers and agents: invaluable allies for high-net-worth individuals
“Someone who has quickly earned this type of wealth and gained popularity for it should definitely consider Private Client Insurance coverage,” Wright said, explaining that insurance brokers and agents experienced in Private Client Insurance policies are well-versed in the exposures and challenges that come with a high-net-worth lifestyle. These brokers have access to specialty carriers and can advise clients on the appropriate range of policies. “They have the expertise and the resources to insure them properly,” Wright said.
Private Client Insurance is designed to help manage an affluent person’s range of risks, from Employer’s Liability Insurance coverage for risks from employees serving on one’s property to Cyber and Privacy Liability Insurance coverage to mitigate cybercrime and data theft exposures from sudden fame, and beyond.
If you are lucky enough to be in a situation like Holzhauer’s, Wright suggested, contact an insurance broker or agent who specializes in affluent, high-net-worth clients and has relationships with specialty carriers able to offer the right coverage and expertise to evaluate your new lifestyle and needs.
As with any coverage need, an insurance broker or agent must be consulted.
This information was provided by Burns & Wilcox, North America’s leading wholesale insurance broker and underwriting manager.
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