Whether a homeowner’s insurance policy covers a home that is worth $100,000 or several million dollars, the basic coverages are the same – property, liability and personal property. However, wealthy families have more complex insurance risks than others and need specialized high net worth homeowners insurance coverage to protect their assets.
For example, the affluent tend to have personal property that is far more valuable than others, employ a staff that assists with the functioning of their homes, or vacation homes, have expensive artwork, wine collections and more, and also run the risk of being sued for large sums of money due to their wealth.
A standard homeowner’s insurance policy will safeguard personal property, as well as liability protection; however, more often than not, a standard policy will limit coverage amounts or exclude coverage for extravagant amenities, such as those that are listed above. Also standard homeowner insurance carriers like GEICO, Progressive, State Farm, Allstate, Farmers & Nationwide etc. are not equipped to value expensive homes properly – which can create large gaps in coverage and overpayment of premiums.
This doesn’t mean wealthy families are unable to properly insure their homes. Specialized insurance carriers do cover them, but the coverage that they require – especially for the aforementioned amenities – do come at a price. Additionally, the majority of providers that offer homeowners insurance coverage have a lengthy list of floaters and endorsements in order to reinforce the additional coverage that high net-worth individuals require for their homes.
High valued property owners include stand-alone dwellings and condominiums or cooperatives that provide living accommodations for an individual, a couple, one or more adults raising children, or a multi-generational family. The individuals living in the high-valued property may be related by blood, marriage or other arrangement such as adoption, foster parent or a guardianship.
The household may also own a pet(s). Owner occupied means that the property owner(s) live on the property and that the premises are not leased or rented out to others. High-valued properties may be historical or custom-built contemporary structures. The improvements such as kitchen cabinets and countertops and bathroom fixtures are often customized. In addition to standard areas such as bedrooms, dining room, kitchen, and living room, there may be cabanas, exercise rooms or gyms, greenhouses, guest quarters, in-home theaters, libraries, offices, pools, saunas, sound studios, studies, and other specialty areas.
The personal property will include a significant number of items that need to be scheduled. Regular travel both inside and outside the country is standard. The on-premises exposure includes the land and all structures on that land. Off-premises exposures include activities of the dwelling owner and all members of the household, including students who live away from home as long as they are in school and are younger than 24. There may be owned watercraft and aircraft, luxury automobiles, and other recreational vehicles.
Homeowners who have a high net-worth have different needs than standard homeowners. For that reason, it is important to know the difference between standard homeowner’s insurance and high value homeowner’s insurance. While anyone who owns a home wants to make sure that their assets are well protected, affluent families have different and more complex needs than standard homeowners – including coverage for primary and secondary residences, private collections, identity theft, and even kidnap and ransom.
Here’s a look at the difference between standard and high value home insurance:
It’s important for homeowner’s who have a high net-worth to have an insurance policy that is specifically designed for their needs because they won’t have to prove the cause of a loss or damage to their insurance company in order to file a claim.
Extended replacement coverage is the most comprehensive coverage available. It guarantees that losses, damages, and repairs will be covered up to the high net worth homeowners insurance policy amount; however, it will also cover an additional coverage beyond the policy amount for a covered claim, such as 25 percent or even up to 200 percent. Extended replacement coverage will pick up some of the additional costs if repairs to your homes exceed the amount your policy will cover.
With a standard home insurance policy, extended replacement cost is not always offered and it is limited if it is. However, with a high value homeowner’s insurance policy, extended replacement cost will be guaranteed, no matter what the final cost is.
This is important for individuals who have a high net-worth because it ensures that they have the right amount of coverage to repair or rebuild their home. For example, if the cost to rebuild the home is $1 million, they will receive the full amount that is needed to repair the house.
If your home suffers extensive damage and it is deemed a total loss, with a high value homeowner’s insurance coverage, you will have the option to rebuild the structure or to take a cash payment up to the policy limit. With a standard insurance policy, this option is not offered.
As your wealth increases over time for affluent families, the value of homes, cars, and other assets tend grow too. This often leaves valuables exposed to coverage gaps as the insurance has not kept pace with the property.
A large concern is if high net-worth individuals have enough personal property coverage for their expensive valuables. Specialty homeowners insurance policies for clients with expensive assets offer higher limits and greater protection than standard homeowners insurance policies. These high net worth homeowners insurance policies offer a broad range of personal property coverage for valuable collections of jewelry, art, wine, guns, antiques and other valuables with limits well above the range that most standard policies offer.
The liability risks for the high net-worth have been growing over the last few decades. As personal injury attorneys have been looking for deeper pockets, the affluent are at a greater risk for lawsuits and larger claims. For example a dog bite or slip and fall could trigger a lawsuit into the millions. For example, in 2013, a NJ homeowner was sued and settled for $1,750,000 – for a dog bite. (Dog bite lands healthcare worker $1.75M payout.) These risks are real for high net worth homeowners.
And because these awards can be large if the wealthy homeowner is found at fault, if they do not have enough liability coverage between their home liability and umbrella, they could be forced to sell their hard earned assets to settle the claim. People whose wealth has grown very fast are usually at the greatest risk – as updating their personal insurance is usually not as much as of a priority than their business insurance coverage. This often leads to a situation where they are severely underinsured and might even have to sell some or all of their business to pay a personal liability judgement.
Property exposure includes the dwelling, its contents, and any related non-business structures and their contents located on the premises. The structures are valued in excess of $750,000 and the contents, including scheduled items, often far exceed structural values. The most significant controllable hazards are fire and theft. The major uncontrollable hazards are windstorm, hail, snow and ice, flood and earthquake. Fire hazards include electrical wiring, heating, cooling, and cooking equipment.
The property may be difficult to access due to gates, rural or coastal locations. The owners may travel and leave the home empty for weeks or months at a time. Monitored alarm systems and on-premises caretakers are important for both fire and theft protection. Water and wind damage exposures can be extensive depending on the location, construction, and vegetation surrounding the property. Accessibility issues may also hinder rebuilding and debris removal efforts. A high-valued property owner often owns more than one dwelling.
Personal liability exposure arises from conditions at the premises and the actions of the members of the household (including pets). The age of any children, the social and civic organizations the family participates in can all impact the loss potential. In addition, the type and breed of any pet may also impact this exposure. Pools, trampolines, tree houses, playground equipment, non-licensed motorized vehicles, and similar attractions must be secured to prevent young children from gaining unsupervised access.
High profile individuals often attract lawsuits because of their activities on and off premises. Employees and contractors who are hired by members of the household can add to the exposure through their actions on behalf of the household but also for injuries they may suffer on the premises.
Auto exposures are from household members driving owned, rented, or borrowed vehicles or from loaning their vehicles to others outside the household. All drivers must be identified, licensed, and have acceptable MVRs. The type of vehicle, ownership, the principle driver, garaging location, miles driven, and type of driving must be considered when evaluating the exposure. Age and experience of each driver must be evaluated. Driving courses can assist drivers of any age. The exposure of household residents temporarily living away from the household exposures such as students away at college is important to explore because of potential vehicle ownership, state compliance, garaging, and usage changes.
Inland marine exposure includes antiques, collectibles, electronics, fine arts, firearms, furs, jewelry, silverware, and other types of property subject to sub-limits and exclusions within the homeowners policy. Items may be kept at several locations and could include in-transit exposure. Fine arts and collectibles may be easily damaged and require special handling when being moved. Theft is a primary concern and monitored security systems are a necessity. While there may be safes and vaults within the residence, some items may be stored in safety deposit boxes at financial institutions.
Workers Compensation coverage is often needed if there are employed individuals in the household, such as a chauffeur, cook, house cleaner, or valet. In some states the coverage is voluntary, but the added cost is worth the protection of the owner from lawsuits and the protection of the worker from injuries and disability.
So which companies offer the best high end homeowners insurance policies? There are several providers out there, but among the best include:
These companies provide comprehensive insurance coverage that is specifically designed for high end homes. High net worth insurance carriers, high net worth insurance brokers, best insurance companies for high networth individuals, high net worth insurance market share, insurance for high networth individuals, chubb high net worth insurance, high net worth personal lines insurance & health insurance for high net worth individuals.
We hope this article on high net worth homeowners insurance has been informative. If you are part of a high net-worth family and you are looking for homeowners insurance, the companies mentioned above are good options to consider, and will help properly protect your home.
Minimum recommended coverage: Homeowners, Personal Inland Marine, Personal Auto Policy, Personal Umbrella.
Other coverages to consider: Earthquake Coverage, Flood Policy, Wind/Hail Policy, Aircraft Policy, International Coverage, Professional Coverage, Recreational Vehicle Policy, Watercraft or Yacht Policy and Workers Compensation Policy.
EK Insurance advises our affluent clients on what coverage options are available to them. Please check out more of our articles on insurance choices for wealthy families:
