Family Office Insurance Gaps Hide Between the Policies

By Jay L. Rogers

A family office can own a thick binder of insurance policies and still not have an insurance program. Policies get bought one at a time, by different advisers, for different entities, usually because a broker called or a lender insisted. Rarely does anyone check whether the homeowner's policy, the trust's coverage, the operating company's D&O, and the office's own professional liability protect the same people against the same events. That's where the losses hide.

When I ran a family office as CEO, insurance sat under my supervision as part of risk management, and I often brought in our COO to help oversee it. I raise that because in many offices it sits under nobody in particular. The estate attorney assumes the broker is watching it, and the broker assumes the CFO is. The CFO, meanwhile, thinks the principal's personal agent has it handled. Everyone is right about their own piece and wrong about the whole.

I've written about cyber exposure elsewhere. Four other gaps deserve the same scrutiny.

Property values drift faster than policies

Underinsurance shows up first in high-value property. In a December 2025 analysis of single-family office risk, WTW (formerly Willis Towers Watson) lists "underinsurance of high-value assets" among the common issues it sees and flags "misaligned policies between the family and the SFO entity." It adds that residences need coverage built for regional risks such as "hurricanes, wildfires, or flooding."

California shows how quickly a gap can open. When admitted carriers pull back, homeowners land on the state's insurer of last resort, and the California FAIR Plan caps residential coverage at $3 million per location. Coverage for everyday risks like water damage and theft has generally meant buying a separate difference-in-conditions policy on top. That matters more than it sounds. In Aon's Family Office Benchmarking Report, which draws on 130 family offices the firm serves and data from around 2020, water damage caused 46% of residential property losses, against 8% for wildfire. On a $9 million house in a fire zone, somebody has to own the job of stitching those layers together.

Families on the coasts already think about fire and hurricanes. Fewer think about tornadoes, which don't confine themselves to farmland. In October 2019, an EF3 tornado with 140 mph winds cut a path of nearly 16 miles from Las Colinas through North Dallas to Richardson. Tornado exposure belongs in the property review for major metropolitan portfolios, not just rural holdings in Tornado Alley. Dallas-Fort Worth, Oklahoma City, Nashville, Kansas City, and St. Louis all qualify.

The review itself should test current replacement-cost valuations, catastrophe sublimits, and percentage deductibles. It should also confirm which entity holds title and how secondary and foreign residences are treated. Aon found that 54% of properties owned by its family office clients were titled to trusts and LLCs, and it recommends naming both the individuals and the titled entities on the policy. A house titled in an LLC, insured in the principal's name, and occupied by a cousin is three coverage questions under one roof.

Kidnap coverage depends on who's named

Families tend to fixate on the ransom limit. I'd start somewhere else. Who's covered: family members only, or household staff and office employees traveling on the office's business? Where does the policy apply? Are extortion and wrongful detention included, and which crisis-response firm comes with the contract? WTW calls kidnap and ransom coverage "essential" for international travel. Yet in Aon's benchmarking data, only 2% of families carried kidnap, ransom, and extortion coverage, and one of Aon's managing directors makes the point that the policy also responds when a family member is taken inside the United States, including from home.

There's a governance wrinkle here too. Standard kidnap and ransom wording requires every insured person to "make every reasonable effort not to divulge the existence of this insurance." Aon is blunter, warning that if it's known the family has coverage, "it could provoke an incident". That sits awkwardly with a family that discusses everything at the annual meeting and posts the vacation on Instagram. Somebody should decide, in writing, who knows the policy exists.

Reputation coverage pays for the response

"Reputation insurance" sounds broader than it usually is. Airmic's guide to reputational risk says existing coverage "primarily focuses on compensating direct expenses related to mitigating the harm" and "might not always cover the full cost of the event itself." The policy may buy you a crisis team. It probably won't replace the business you lose.

Two different claims also get lumped together. One pays to repair damage to your own reputation, while the other defends you when someone says you damaged theirs, and they sit in different policies with different triggers. Before relying on any of it, find out what event triggers coverage, whether public relations fees need the carrier's prior consent, and what the sublimit is. Then ask whether the family's operating company is even an insured entity under the office's policy. Ownership alone doesn't make it one.

One person, five capacities

This is the gap I'd fix first. Family members sit on nonprofit boards constantly, yet Aon found that only 15% carried individual D&O coverage, leaving them dependent on whatever the board bought. A principal can be an officer of the family office, trustee of several trusts, a director of the operating company, and a board member of the family foundation, all before lunch. D&O coverage generally follows the role a person was playing when the trouble started. An American Bar Association analysis explains that directors and officers are covered when they "were principally engaged in that capacity at the time," and that capacity exclusions can bar claims tied to service as a "director, officer, trustee" of another entity. WTW lists D&O, trustee liability, and fiduciary liability as separate coverages for exactly that reason.

Family litigation makes it worse. Insured-versus-insured exclusions can restrict coverage when one insured sues another, which describes most sibling disputes. McGriff's April 2026 review of family office management liability warns that fights over "control, succession, or investment decisions can quickly escalate into litigation," and that Side A coverage is "particularly important in family offices where indemnification may be withheld during internal disputes." The non-family executive who gets removed and then named in the suit is usually the most exposed person in the room and the least able to pay for a defense.

What a coverage map looks like

I'd recommend an annual coverage map. It isn't an industry standard yet, and it should be. Start by listing every person, entity, trust, property, and outside board seat, then match each one to actual policy wording rather than the title on the declarations page. Run realistic claims through it: a wildfire loss on a house owned by an LLC, a family member detained overseas, a lawsuit against the foundation, a beneficiary suing the office's management. Look for exclusions, shared limits, deductibles, and gaps between primary and excess layers. Finally, put one named person in charge of updating the map after acquisitions, board appointments, relocations, marriages, divorces, and births.

NFP states the standard plainly: coverage "must be tailored to align with the SFO's specific operations and functions." Insurance is the one purchase you hope never to use, which makes it the easiest one to stop thinking about. Build the map before the claim. Afterward, the policy wording is the only document anyone in the room will want to read.

Author Bio: Jay L. Rogers is Chief Investment Officer of Alpha Strategies Investment Consulting and Managing Partner of Global Rock Family Office Group. He has spent more than thirty years in institutional and family office investment management, including senior roles at Bear Stearns, Morgan Stanley, and Wells Fargo, and serves as a testifying expert witness in fiduciary duty and family office litigation.