Typically, high-net-worth individuals (HNWI) are being called such when they have a net worth that reaches the one-million-dollar benchmark. The benchmark amount is a general consensus and not an ultimate measurement of one’s net worth. Wealthy individuals have relatively more complex risk management needs because of their expensive possessions. This is true when it comes to homeowners. Some homeowners are categorized as very-high-net-worth (VHNW) individuals with $5-$30 million net worth and some homeowners are categorized as ultra-high-net-worth (UHNW) individuals with $30 million and up net worth. We will just simplify the topic by focusing on HNWI and high-net-worth insurance.
So what qualifies as high-value insurance when it comes to homeowners? Some insurance carriers would consider a certain home qualified high-net-worth if the total home value exceeds $750,00 and there is no telling about the ceiling.
Even for high-net-worth individuals, their home is likely to be their most valuable asset. This could mean it is part of their own that could be considered one of the most important to cover. In most states, high-value home insurance coverage includes an allowance for jewelry or other lost and stolen valuables. Individuals with multiple high-net-worth homes in multiple markets may have to find separate coverage for each of those properties. What the state law dictates, including city ordinances and homeowners association regulations create an impact. They all can control the necessary and viable benefits required in policy.
High-net-worth individuals usually have high-priced possessions. HNWI also has expensive hobbies. Art, antiques, wine collections, boats, and vintage cars are among these people’s most valuable possessions and these possessions tend to be neglected for insurance. Other valuables in and around your home such as clothes, shoes, curtains, carpets, and electrical goods may just be neatly piled in the closets or your cellars and garages and yet they too may need to be accurately assessed for insurance.
There are times that even if these things are insured, a possession’s actual market value is relatively unknown to the homeowners because they are not hands-on and they let someone do the insurance transaction for them. This creates a loophole when the insurance coverage does not fit the possession.
If you are a homeowner who collects museum pieces for a long period, putting your collections in a safe place may not be sufficient. During worst scenarios like fire or theft, you should not be caught off guard realizing that your standard home insurance does not have adequate coverage and therefore put you in a difficult situation in making a claim.
To say that you have to be a hobbyist for collector’s items to reap the benefits of high-value homeowners insurance is a misconception. There are items of great value in and around your home that are uniquely yours. A classic example of a valuable item would be a family heirloom. For instance, a family has left off a piece of a rocking chair that has been there for generations. The homeowner is aware that it could finally break anytime soon given the rocking chair’s age. The homeowner immediately asked for an accurate assessment because of some value attached to it. After the rocking chair gave up, insurance experts assessed the value and quoted the amount of $35,000. Because there was no neglect on the part of the homeowner, he now has the option to have the furniture fixed that could cover the repair or buy a new one instead.
High-value home insurance caters to homeowners with unique home insurance needs. Bankable personalities in showbusiness, royal families, star athletes are among those who are profiled for high-net-worth insurance since they are most likely to acquire an expensive home. As long as you have home contents worth one million dollars, that qualifies you for high-net-worth insurance. You may not be as famous as those faces you see on tv but if you have a million-dollar home, you sure need the right amount of insurance protection.
There are two major factors in which a high-net-worth home will benefit from the right insurance: higher policy coverage and expanded limits and specialty and additional insurance coverage.
Higher Policy Coverages and Expanded Limits
The most important benefit of getting high-value home insurance for homeowners is higher policy coverages and expanded limits. This is both for your home itself and for your other assets. Higher policy coverages and expanded limits are mostly typical for items subject to specific limits, like jewelry and cash. For instance, average homeowners’ insurance coverage might have a policy limit of $1 million and put a limit on single jewelry to $1,000.
Most home insurance carriers would tell you about an endorsement for high-value insurance with a high replacement cost for property damage or loss. These insurance carriers would put expensive items like a diamond necklace under the special endorsement. High-value homeowners insurance carriers would include higher limits without any endorsements required.
The nature of coverage on these items is intended to be as broad as possible, with all the worldwide risks covered offering superior single item limits with so many add-ons on the side.
These are some of the coverages with the expanded limit for luxury homes:
- Guaranteed replacement cost coverage – This covers the payment for the full cost to repair or replace your high-net-worth home after a total due fire or natural disasters like a hurricane. If you have this coverage and you exceed your limit, you do not need to pay for an extra cost.
- Dwelling Coverage – This generally covers the house as a whole.
- Structure coverage – This typically covers other structures that may involve your gates, fences, garages, terraces, and gazebos.
- Sewer and drain backup coverage– This covers broader protection for plumbing issues during a flood incident.
- Flood Coverage – This coverage offers much bigger protection for homeowners with high-net-worth when compared to standard homeowners who get protection from flooding through the National Flood Insurance Program.
- Second-home/ Vacation home coverage – This coverage may allow you to fold a second home’s coverage into your high-net-worth home insurance especially for a second home or vacation home that is located in the coastal area. You can combine this coverage into one policy and get the full coverage you need.
- Living Expenses Coverage – This coverage helps pay for a temporary residence and meal allowance if a home is damaged due to fire and other natural emergencies. Since your living expenses coverage has no upper limit, you would not have to go through a drastic change of lifestyle while dealing with a loss of property.
- Rebuilding to code coverage – This coverage may help you compensate for rebuilding your home that was destroyed according to the new code enactment. You do not expect to update your home each time that there is a current code enactment but if your home needs rebuilding due to a then it must meet the current regulations in place at the time of the loss– which can be extremely costly.
- Scheduled Jewelry Protection – This helps to ensure that your pieces are protected and that some of them may not be included in your schedule. Some high-net-worth insurance may allow coverage of $50,000 per piece for lost, stolen or destroyed jewelry. This will help protect your valuables and help you from unexpected expenses.
- Specialty and additional insurance and coverage – Home insurance coverage for high-net-worth homeowners also often includes specialty and additional insurance coverage. Many high-net-worth insurance carriers offer coverage that is not available to standard insurance carriers. The type of coverage varies from one insurer to another so speaking to an insurance expert that represents different high-net-insurance companies would be ideal to see which one offers coverages that benefit you the most.
Specialty Coverage may include but is not limited to:
- Personal Property Coverage – This normally covers the personal belongings of the homeowner that may exclude jewelry.
- Liability Coverage – This covers multiple incidents where a homeowner may be held accountable for property damage or personal injury. This coverage also has an expanded coverage called Employment Practices Liability that will help you if your domestic help employees including your nannies, drivers, and gardeners are injured in the job. This will also help you pay for medical expenses and your employees’ wage loss. If your domestic employees will sue you, this coverage will pay for your legal fees.
- Kidnap and ransom coverage – This covers the protection of homeowners against income losses, ransom demands, and medical-related expenses as a result of the kidnapping. This coverage may be expanded to corporations and NGOs and their employees and volunteers who travel frequently outside of the United States.
- Identity theft and cybercrime coverage -This coverage protects you should you be a victim of a security breach. High-net-worth insurance carriers help you against identity theft and cybercrime using their state-of-the-art cybersecurity protection. This coverage also helps you financially in case you are unable to use your card and other online banking due to a stolen identity. Some insurers would expand the coverage to online ransom where a computer hacker encrypts the data on your computer and demands you to pay in exchange for retrieving that data.
Additional insurance and coverage may include but are not limited to:
This is also known as excess liability insurance. This helps when all your other liability coverages, such as your car, home, boat, and other prized possessions had been used up already to recover a loss. For instance, if you met a car accident and it was your fault and the other driver sued you for bodily injury and property damage, your car insurance may only cover 30% of the total liability cost but your umbrella insurance could pay the remaining cost preventing you from out-of-pocket expenses.
This will help you protect your assets against fluctuations. This will cover the replacement cost of personal items like art, antiques, and wine collections. In many cases, jewelry can also be part of the coverage of value insurance. This type of policy covers losses due to theft, breakage, and damage which a standard policy does not cover. You can have the option to cover groups of items or blanket coverage, an all-inclusive coverage amount place for a certain group of items, say, your antique collection.
This can offer you replacement cost or agreed value cost. Your high-net-worth insurance provider can give options during depreciation. Your 2017 Porsche may not be as expensive as it is in 2020.
This can offer your yacht and your other water vehicle protection against theft, personal accident, weather, and accidental damage.
This helps you in your travels to assure you that both your possessions and travel arrangements are protected. The same protection that helps you should something goes wrong and you need to make a claim.
If emergencies like fire and hurricanes destroy your home, you may have the option to rebuild or replace it. The choice is yours if you opt to receive a cash settlement instead.
Natural disasters should also be given a big emphasis on getting high-net-worth home insurance. The Australian bushfires in late July 2019 affected not just animal habitats and standard homes but several high-net-worth homes as well. What happened in Australia as a result of bushfires may have little to zero effect on the homeowners’ insurance sector in the United States but it sure gave them an idea to further enhance the package they offer to homeowners. After all, the United States had its own experience of wildfires in California back in 2017.
For areas where there are wildfires, having proper home ventilation like ember-resistant vents that prevent cinders and ashes from getting inside your home is necessary. Materials used for these basics do not automatically make them expensive and, surprisingly, a lot of homeowners do not have such home features.
If you contact your high-net-worth home insurance carrier, you will learn that even a high-net-worth policyholder like you is entitled to some discounts on your insurance premiums if they were the installers. Your home insurance carrier can also teach you management strategies on wildfire protection and risk reduction for high-net-worth homes. It usually starts with free consultations. All you need to do is set an appointment.
Many wealthy homeowners have their primary or secondary residences in coastal areas. In the state of Florida, weather-related catastrophes like hurricanes are a normal occurrence and this affects even the high-net-worth homeowners. Given the location, loss claims related to water damage can become prevalent. High-net-worth homes can be impacted as much as standard homes since high-net-worth homes tend to have more plumbing services needed, more bathrooms and bedrooms mean more labor and more labor materials.
Mother nature is on a rapid change so decisions on how to adapt to the change and how to protect you and your home from all types of natural catastrophes are essential. You have to be ready for emerging risks like environment-related accidents that you do not have total control over. For larger risks as natural disasters, you do not have to worry since your high-net-worth insurance provider will survey your property and they will offer not just advice on risk management but they can also give you discounts on valuations.
One factor that stands out with high-net-worth home insurance is that you would receive more attention and that your expert consultant would be keener on details and go the extra mile to explain everything to make you a very satisfied customer, something that standard home insurance would lack.
Also, high-net-worth insurance companies are more capable of dealing with high-net-worth homes. Their expertise and experience do not limit their services with your home value since they understand furnishings, high-end materials, and other valuable assets in and around your home.
Options Are Endless
There are hundreds, maybe thousands of standard homeowners insurance companies but there are only a few high-net-worth home insurance companies that provide specialized coverage for high-net-worth individuals. Most home insurance companies for high-net-worth individuals have independent agents or insurance brokers who work for them. Because of the complexities that come along with high-net-worth home insurance, you cannot obtain an online quote therefore, a face-to-face conversation is preferred, or shall we say, required.
What you can do; however, if you want to start online, is to check on reviews and ratings of different high-net-worth home insurance providers. How high-net-worth home insurance carriers are being graded by the National Association of Insurance Commissioners based on complaints will help you gauge the strength of the services of each home insurance provider.
Many insurance companies that offer customized services for high-net-worth homes provide different benefits and they will make sure that the insurance coverage you get will be relevant to your needs.
Personalized service is a necessity for people such as yourself. From the time you want to sit down and talk to discuss your policy through a high-net-worth home insurance expert, you will find out all the information you need to make a claim. Indeed, it is the claims service of high-net-worth home insurance policies that separates them from standard home insurance policies.
We hope we have helped you understand more about insurance for luxury homes. For any questions or clarifications, please do contact us. We love hearing from you.