High-net-worth individuals have a number of distinctive needs, and yet many may think insurance for their various properties is not one of them. Own two fine homes, a luxury car, a boat, several art pieces and expensive jewelry? Conventional wisdom would be to simply buy enough insurance to cover potential massive losses.
But that mindset can lead to gaps that significantly expose one to more risk, may generate unnecessary added premiums, or result in missed opportunities to receive complimentary services. The affluent do have a host of special situations that can range from homes in multiple states and employment of service staff to concerns about family members kidnapped for ransom. That’s why it’s critical for such individuals to enlist insurance experts experienced with such scenarios and knowledgeable about the carriers who have specific policies for those needs.
Let’s take a look at some typical and at times complicated situations the affluent encounter.
Owning Homes in Multiple States
Most insurance agents are licensed in one state, a few are licensed in several and it’s rare if an agency can write policies in all 50 states. (In Illinois, for example, more than 10,000 agents handle homeowners insurance yet only a fraction of them are registered in multiple states, including our firm, which can arrange coverage in all 50). So what happens if your primary residence is in Illinois with others in California and Florida? Your Illinois agent will need to refer you to agents in the other states and you will have to deal with an agent not familiar with your specific desires and needs. And then, what often happens next is creation of separate insurance programs with varying coverage and claim procedures.
This all could be streamlined by working with one agent and one carrier to create a comprehensive insurance program, thereby protecting against the possibility of gaps and/or duplication of coverage. Bundling policies together can generate significant savings on premiums while affording far-reaching conveniences for the policyholder. In addition, such policies provide much-needed flexibility to cover a host of distinct liabilities. For example:
- Service Workers. Your cook, maid and/or landscaper may work in more than one of your homes. Workmen’s Compensation, fair employment rules and other workplace issues are addressed in one policy without the need to customize for possible differences in regulations on a state-by-state basis.
- Climate Issues. The home in Florida needs to be protected from coastal exposures like storm surges and winds, liabilities not encountered in Illinois. But a comprehensive insurance program can address those concerns in the Sunshine State (and let’s not forget earthquake coverage for that third home in California).
- Recreational Vehicles. The Florida house provides residents and guests all-terrain vehicles to take directly from the beach house to the water. Basic homeowners companies might not extend coverage for these vehicles. A comprehensive multi-home program can more easily accommodate coverage because a savvy insurance agent will leverage the higher premiums generated through one carrier by bundling policies to justify the higher exposure from luxury items like ATVs, golf carts and snowmobiles.
Valuables and Collectibles
Valuables and collectibles – whether coins, fine china, musical instruments, jewelry or art – have special meaning for all of us. Many people are unaware that their valuables might not be fully covered under their homeowner’s insurance policy. Typical homeowner’s insurance policies only protect your place of residence, personal liability and the general contents of your house, and limits for valued items typically range from $1,000 to $5,000.
If you rely solely on a homeowner’s policy, you most likely will face significant financial costs if treasured items are lost, stolen or damaged. For adequate piece of mind, you should protect your prized mementoes, collections and pieces with an insurance option designed specifically for such possessions.
You will want to choose an insurance policy that offers broad coverage based on the item, value and location. Consider if items are transported, how they are stored, and where. A broad policy will cover many unforeseen circumstances such as storms, smoke damage, breakage, mysterious disappearance, pairs of items, sets and parts, and appreciation.
Some policies also incorporate sophisticated restoration services for damaged artwork, a valuable add-on to consider. Again, an agent who specializes in this special segment of protection can advise you on the merits of purchasing such coverage.
The Most Prized Possessions: Family Members
An agent with experience in helping high-net-worth individuals understands the fears many families have regarding kidnapping. Those advisors can discuss special coverage that provides maximum financial protection in the event of a kidnapping or extortion loss. This is particularly relevant for those who travel extensively outside of the United States.
A complementary policy can provide coverage to cover costs for a family member who is a victim of a home invasion, child abduction, carjacking or stalking. Coverage is available for those not living at home (e.g., a college student) or if an individual is on business or vacation.
Another benefit often gained by purchasing the kinds of policies described here is the number of customized and complimentary services available, usually based on the level of premiums. Among the kinds of free services offered:
- In-depth Home Appraisals. Comprehensive evaluations generally provide cost estimates to rebuild a home in its entirety, document features of the home with measurements, photos and detailed descriptions, and provide suggestions for loss control.
- Infrared Scans. This service uses cutting-edge, infrared camera technology to “x-ray” a home to help identify moisture problems and potential fire hazards.
- Wildfire Defense. Emergency defense measures such as foam sprays are used to defend a residence when a wildfire is raging within a few miles of the policyholder’s home.
Information Gathering From Expert Essential
As one can see, the insurance issues for wealthy individuals and families are many, can be complicated and be quite unique. That is why there is great value in working with an agent who knows the extensive scope of questions that must be asked of policyholders and how to incorporate that information to ensure policies cover all of the scenarios at a reasonable cost.
Similarly, it is important you and your insurance agent to work with an insurance carrier with both extensive experience and a stable, long-term history working with high-net-worth individuals.
Bundling policies to prevent gaps and overlaps is one critical tactic. Leveraging premiums to get coverage for less desirable exposures such as coast exposure and water craft is another. Plus, access to complimentary risk management services such as infrared scans can complete the insurance package.
By employing these tactics, high-net-worth individuals can best protect the wealth they worked so hard to acquire and maintain.
-Article by Melissa Neis