What Affluent Homeowners Demand Insurance Companies Cover For High-Valued Property
Not all home and auto insurance is the same.
Created with the intention of better protection for the wealthy, Affluent Home Insurance seeks to cover high-value homes with increased property coverage forms and broadened liability policies.
The majority of home insurance companies seek to work in the preferred market or general population.
Typically these insurers offer significant discounts to consumers that have either a minor claims history and who meet a risk profile that is typical of Middle American.
Preferred carriers constitute most of the insurance companies that we all know and sometimes love include names like State Farm, Allstate, Farmers, Nationwide, Travelers, USAA, and numerous others.
Preferred carriers tend to spend quite a bit of money on marketing.
Beyond these carriers there exists coverage for the well to do. There are numerous differences between the two with more significant differences existing with the home insurance policies.
The concept of Affluent Home Insurance is that it seeks to cover a different aspect of American Life: The Wealthy.
Whereas typical Americans that are living paycheck to paycheck and often cannot afford to replace a $4,000 furnace, Wealthier Consumers are not concerned with this. They will easily swap out high deductibles for broadened liability coverage. The more affluent people see the need to worry more about the 3 Million Dollar Law Suit than the relatively inexpensive fender bender.
Affluent insurance is not limited to just home insurance. The same carriers that offer Affluent Home Insurance, typically also offer high-value auto insurance and to round out the mix - affluent extended personal liability policies, similar to umbrella policies.
Location, Location, Location:
Wealthier clients tend to own homes in specific expensive zip codes. A simple look at a Forbes magazine will demonstrate that many of these individuals are members of the same clubs and their kids go to the same schools. Therefore it should not come as a surprise that their homes tend to be in the same neighborhood or area of town. The issue with this for insurers is that these opulent towns are incredibly expensive and difficult to build in. Just crossing a town border can quickly change the rebuild cost from $432 per square foot to $732 per square foot. Common rebuild algorithms and hence many insurers may fail to understand this minor difference and hence under-insure many homes adequately.
Getting Real with Coverage A:
The primary coverage of your home is under Coverage A. This dwelling amount is significant. Homes that are larger, more opulently built, and built-in more select areas can quickly cost two, three, four, or even ten times as much as their neighbors. These Giant Coverage A policies can be hard to place with most carriers. The Affluent understand and accept it. One important note is that these specialty carriers are almost guaranteed to do an onsite Inspection and Appraisal. The appraisal will be detailed and involve a rebuilding specialist who will come to your home and create an intricate cost basis of what the insurance carrier will request/require the proper Coverage A to be.
Serious Extended Endorsements:
The total coverage A afforded in the case of large-scale loss, technically is often more than just that Coverage A number. Depending on the regulations of the state that you live it, you may have an extended endorsement from 0 to 25% to 100% to unlimited. In California, the typical minimum amount of 25% is what most carriers offer. The affluent insurers will often go up to 100% and in some situations and in some areas…beyond. The purpose of this all-important endorsement is protecting against the principal of demand surge. Demand surge is primarily the increase in rebuilding costs from a large-scale disaster. Extended Rebuild Endorsements act as an additional amount of building coverage to your policy. In just about all cases more is better.
Building Ordinance Law and You:
A quirk exists between your insurer and your county or town building inspector. If during the course of a covered loss, a building inspector requires you to change something in addition to the damage component; you will only have to a limited extent. Often this is just 10% of your coverage A. In other words; the building inspector could force you to have to pay out of pocket - to bring your house up to code after just a small covered plumbing leak. This all-important building ordinance and law endorsement is seen at its’ extreme when certain towns require the remaining 60% of a house to be demolished when a certain threshold of damage reached. Enter the Affluent carriers that often will offer a 100% Building Ordinance and Law coverage.
Why Have Just One Home?
Finding insurance for secondary homes with the preferred market can be challenging. In the affluent home insurance market, it is almost, assumed. So too is their understanding of which home qualifies as the primary home. A secondary home, thirty miles from the main house? This gives pause to many preferred carriers, but experience says that this is not unusual for affluent providers.
Trust In Yourself:
The addition of a Trust to your home insurance policy may be a good idea. Care should be taken to speak with your attorney about this. A few preferred carriers struggle to accomplish this task when requested. The affluent carriers typically can accept many trusts on either a Named Insured or Additional Insured basis. This can assist in better covering liability, personal property, and the actual home itself.
Fantastically Large Deductible Options:
As an insurance agent, I am amazed at the many preferred carriers highest deductible option. Affluent insurers can go high, super high. Ever heard of a $100,000 property deductible on a home? You would if your house was worth $10 Million. The clients that purchase these types of home insurance policies need to be prepared to insure themselves for the smaller events and instead rely on the carrier for the more significant potential threats.
Wide and Broad:
Affluent home insurance typically comes with a much-broadened form of liability coverage. Personal Injury, a type of liability coverage is often added as an endorsement is usually standard form for the affluent. Beyond that, broadened personal and premises liability is hard to explain but can be useful in an odd situation.
Private Fighters are Helping You:
Yes, private firefighting forces are used with a few of the select carriers. These private forces are by no means guaranteed to arrive during a large wildfire, but the insurer intends to attempt to protect your home with increased resources. The process of using these services involves you enrolling for the service if it is available with your policy based on where you live when you sign up with the insurer. From the insurer's standpoint, it makes more sense to pay to protect your home than to pay to have it rebuilt. Therefore they are willing to throw significant assets at it to stem the potential loss.
Typical is Not Enough:
Affluent home insurance is not just about what the insurance company gives you. There are increased expectations on the homeowner’s side as well. These carriers are more likely to require centrally monitored fire and burglar alarms, possibly a safe, and certainly a well-cared for property. A well-cared-for property involves the home being in “excellent” and “clean” condition, with no significant issues. Any signs of dilapidation or unkempt conditions discovered during the inspection will require your immediate attention. These select carriers more likely issue "Fix-it" item requests from the insurer that may be seen onerous for common insurance providers. They expect the best from you.
Replace that Personal Property:
The best personal property coverage form is Personal Property Replacement. This covers what it costs to replace that t-shirt, not what it’s worth. What is an 18-year-old Van Halen T-Shirt with holes in it worth? It might only be worth $2 on the books, but to replace it with a modern shirt, it may cost you $28. See the issue?
Fine Arts, Collections, Gold Bars, and Other Tchotchkes:
Coverage for collections is where Affluent Home Insurers shine. Most insurers begin to require appraisals for coverage as low as only $1,000. The affluent do not typically require appraisals nearly that low. These select carriers also have a larger appetite on the amount, sometimes covering individual art pieces or collections valued in the millions.
Of Mold and Motors:
That is not the end of the additional coverage options afforded you with some of these insurers. Just about every endorsement, whether it be for mold coverage, business personal property, equipment warranties has much higher options if you are interested. Some of them on individual policies included as standard.
We cannot overstate how much more coverage that affluent home insurers are willing to offer, but it does come at a price. The kinds and types of people that purchase Affluent Home Insurance should be prepared to have relatively high deductibles in exchange for overall greater coverage.
Scott W Johnson, specializes in Affluent Life Insurance policies and is the owner of Whole Vs. Term Life Insurance.com, a comparative life insurance site that continually asks the eternal question: Which form of Life Insurance makes the best financial sense for my family and me. Johnson lives and resides outside San Francisco, California. His insurance agency is a state certified environmentally friendly Green Business.