High-end homes, big-ticket items like jewelry and fine art, expensive collections and a higher risk of lawsuits make Private Client Insurance essential for affluent individuals. To learn more about the Private Client Insurance market and its particular risk profiles, Crain’s Content Studio sat down with Heather Posner, Associate Vice President, Director, Private Client, Burns & Wilcox, Cleveland, Ohio.
What are the biggest risks facing those who would need Private Client Insurance?
H.P.: Highly successful individuals who have higher-valued assets than average need the coverage provided within a Private Client Insurance policy. One of the greatest challenges they face from a risk perspective is protecting their lifestyle and assets. Additionally, we live in a society that is very litigious, and affluent individuals are at a far greater than average risk for being sued. Investing in adequate personal liability coverage to help with defense and other costs associated with litigation is essential for such individuals.
What should these individuals be aware of relative to these risks?
H.P.: There are things that everyone can do to avoid property damage losses. To help them manage their particular risks, affluent individuals should seek the advice of an insurance broker or agent who can educate and guide them toward the best preventive measures as well as appropriate protections for themselves and their assets. High-value homeowners typically invest a great deal of time and resources in security systems and alarms, which are very important; however, like any homeowner, they are more likely to experience water damage than a break-in. Preventing water damage is the best kept secret on how to avoid an insurance claim. Affluent individuals should also educate themselves about how their wealth makes them especially vulnerable to personal liability lawsuits that could leave them responsible for paying potentially large settlements.
What kinds of insurance policies can help individuals respond to these threats?
H.P.: There are multiple policies that affluent individuals may need to have in place to make sure that they and their assets are adequately covered. They should make sure that the terms and conditions outlined in their Homeowners & Dwelling Insurance policy are clear and appropriate for their needs by consulting an insurance broker or agent who specializes in understanding such terms. In areas that are not catastrophe-prone, there is a coverage called Guaranteed Replacement Cost, which means that no matter how long it takes to rebuild your home following an insurable event—perhaps you need a specific architect who cannot begin work until a certain date, or materials are needed that are in short supply—the cost would be covered. Another important example of a valuable coverage is Additional Living Expense. If you were displaced from your home due to a house fire, you may want a similar home for your family while your home is being rebuilt, perhaps in a certain school district where homes are expensive or not typically available to rent. With Additional Living Expense coverage in place, your insurer would negotiate on your behalf to find suitable living arrangements.
What limitations and exclusions should affluent individuals be aware of? Are there any supplemental coverages they should know about?
H.P.: A standard carrier may offer $1 million to $2 million in Personal Umbrella coverage. For someone whose primary home is valued at $5 million—and is just one asset of many—a Personal Umbrella policy with a $2 million coverage limit is entirely inadequate. Wealthy individuals need coverage that is structured and customized in a manner that addresses the full range of their exposures. Personal Articles Floaters for jewelry or fine art are essential to adequately cover the value of such items or collections, which are not typically covered under a Homeowners & Dwelling Insurance policy. Homeowners Insurance policies also do not cover floods, so if your basement floods and a piece of fine artwork or jewelry is damaged or destroyed, the loss of the article would not be covered under Homeowners Insurance. It would, however, be covered if a Personal Articles Floater were in place. I believe everyone should have Flood Insurance. Technically, we all live in a flood zone; it is just a matter of whether our risk of flooding is high, moderate or low. The majority of floods do not occur in high-risk zones.
How has COVID-19 affected the Private Client Insurance market?
H.P.: COVID-19 certainly has everyone staying home more. Parents who are still working may be bringing someone into their home to help with homeschooling their children. If that tutor were to slip, fall and suffer an injury while in the home, there is potential for a liability claim on the Homeowners Insurance and potentially on the Personal Umbrella Insurance. Risk exposures have changed slightly in that there may be less potential for water damage in primary homes that are occupied constantly, but slightly more potential for water damage in vacant secondary homes.
What are the greatest opportunities for brokers in the Private Client Insurance market?
H.P.: Private Client Insurance is an underserved market and would welcome more professional brokers to serve its clients. It is important that brokers are able to access the appropriate carriers for these clients and that they are trained to identify risks. It is not about the cost of the policy, but rather its effectiveness. Brokers should educate themselves on what markets are available, what coverages are available and the different exposures that these clients have.
How can brokers target this market and increase their success?
H.P.: Make sure their clients understand whether or not they have appropriate coverage for their needs. Helping clients understand that insurance is an investment in a layer of protection for their wealth—versus just another expense—is extremely important in this market. Brokers should understand that many, if not most, of these individuals have had experiences with carriers that have not covered them appropriately. Often these clients utilize attorneys, accountants and financial advisors on a regular basis but may not be accustomed to having their insurance broker at their metaphorical table of important advisors.
Private Client Insurance
WHY YOUR CLIENTS MIGHT NEED IT: Affluent individuals own high-value homes and other assets, such as jewelry, fine art and luxury vehicles. They are also more likely to be sued.
PROTECTS AGAINST: The most common exposures, such as water damage, electrical fires and roof leaks, as well as costs related to lawsuits alleging liability and replacing or restoring high-value homes and other valuables.
EXPERT OPINION: “Highly successful individuals who have higher-valued assets than average need the coverage provided within a Private Client Insurance policy. One of the greatest
challenges they face from a risk perspective is protecting their lifestyle and assets,” said Heather Posner, Managing Director, Burns & Wilcox, Cleveland, Ohio.
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