The insurance and financial sectors identify high net worth (HNW) individuals as having a minimum of $1 million in liquid financial assets, excluding real estate and fine art items. Roughly six million households are prospective high net worth insurance program clients in the U.S.
What is High Net Worth Insurance & Who Needs It?
High Net Worth Insurance Programs combine a group of insurance policies necessary to protect the unique risks exposure that HNW clients with vast assets face. High net worth risk management services rely on customized insurance policies to meet the specialized needs of wealthy clients, including homes, collectibles, travel, excess liability, recreational marine insurance, and much more.
High net worth clients require dedicated insurance services. Many have financial portfolios significantly above the $1 million minimum classification for a high net worth individual. Wealthy people often have substantial investments in real estate, collectibles, and other valuables. Because they have risks unique to accumulating wealth, they need to protect their assets with specially designed high net worth insurance programs.
Types of High Net Worth Insurance
Insurance agents with high-net-worth clients perform their due diligence using in-depth risk assessments for lifestyle, cyber, business, and other exposures. In the guide to high-net-worth insurance programs, we provide details on the specific policies found in them.
Home & Contents Coverage
An HNW homeowner policy has the same protection as a standard homeowner policy with comprehensive coverage with cost-effective, high deductible, and other options designed to protect the exceptional quality of materials and attention to detail in higher-value homes.
High net worth homeowner policies include Guaranteed Replacement Cost for the dwelling and other structures. Replacement Cost of Contents without deductions for depreciation. Cash settlement option for those who choose not to rebuild or to rebuild at another location. And Enhanced Coverages for Landscape, Pets, and Rented Property
Valuables include collections of art, antiques, furniture, jewelry, wine, and more. Most types of loss are settled with no deductible. Flood insurance is a named peril in this type of coverage. Services available can include collection management professionals to complement the client’s team of advisors and curatorial staff. Developing maintenance programs, making reparations for natural disasters, and more are available services from collection management professionals.
Kidnap & Ransom Coverage
HNW clients are targets for kidnapping, extortion, hijacking, wrongful detention, and ransom payments. Kidnap and Ransom coverage helps pay for losses related to most kidnap, ransom, and extortion incidents. Examples of payments under the coverage include:
Ransom paid to extortionists and kidnappers.
Ransom money that disappears, or is destroyed, confiscated, or wrongfully appropriated while in transit.
Payments for lost wages and salaries related to the incident.
Relocation and job retraining costs after a kidnapping.
Accidental dismemberment or death that occurs during a kidnapping.
Medical care for kidnapped persons who were held for ransom or extortion.
Losses due to operational interruptions caused by extortionists or kidnappers.
Company brand and reputational losses incurred because of kidnap or ransom events.
HNW family members are at risk to suffer the effects of psychological, physical, and emotional trauma due to a host of crimes, including child abduction, cyberbullying, stalking, physical, aggravated assault, carjacking, home invasion, air, and road rage. Family Protection coverage helps pay the costs to recover from such events and prevent their reoccurrence.
There are family life insurance and health insurance policies designed for HNW families. Life insurance is used for financial planning, wealth transfer, and other sophisticated purposes to fit the needs of wealthy families. Family health insurance policies may include coverage that pays a single premium for concierge medical treatment for all family members.
Family Office Insurance
Wealthy families use a family office to describe a privately held company expressly set up to manage family investments and create wealth transfer options across generations. $100 million in investable assets is the typical threshold for a family office.
Family offices are potential targets for lawsuits resulting from claims of inadequate services or errors that occurred during the performance of a service.
Family Trust and Trustee Liability insurance protects a family trust for acts committed by a family member or trustee employed by the family office. It covers the trustees who administer all trusts that are sponsored or advised by the family office.
Directors & Officers Liability coverage safeguards the directors and officers and their personal assets against errors and omission claims. It protects against claims of misrepresentation, misstatement, omission, neglect, and breach of duty. The policy covers claims of wrongful acts that occur during family office business or while members serve as nonprofit organization board members on behalf of the family office.
The number of lawsuits against HNW individuals and families has grown during the past two decades. The primary cause for high-net-worth liability claims primarily stems from injuries sustained in autos, recreational vehicles, and watercraft accidents. Injuries from accidents in the home or on the premises to visitors or domestic employees also contribute to the bulk of personal liability judgments against wealthy individuals.
Personal liability protection covers accidents where the insured is legally responsible for bodily injury, property damage, or both regardless of whether the insured is in and away from home. The types of claims include medical bills, legal fees, and more. Personal liability is a coverage included as part of standard homeowner policies. HNW families usually require liability coverage more than the standard policy limits requiring an endorsement or standalone policy to fill the gap.
Exclusions to personal liability include:
Injuries due to automobile accidents, which are generally covered with an auto insurance policy.
Intentional acts by a family member that causes bodily injury or property damage.
Injuries or damages suffered by family members while in the home.
Claims related to business activities or suits associated with the HNW individual’s profession.
Excess liability insurance is also known as umbrella insurance. It provides an extra layer of insurance coverage that extends the limits of other High Net Worth Insurance Program policies, including homeowners, auto, and watercraft insurance.
Excess liability provides additional protections for insureds against lawsuits for bodily injuries and damages to the property of others in an accident caused by the insured or a member of the insured’s family. It covers losses against claims of libel, vandalism, slander, and invasion of privacy.
As comprehensive coverage, it can extend limits to include Not-For-Profit Board Liability, Employment Practices Liability, and more. High Liability Limits range from $1 million to $100 million with worldwide protection providing legal defense fees for accusations of libel, slander, or negligent injuries and even for groundless, false, or fraudulent claims.
High Net Worth Insurance Costs (and what factors affect the price)
The broad array of insurance policies that agents include when creating high net worth insurance programs makes providing typical or average costs near impossible. Further complications to pricing are the range of risks HNW individuals face and the enormous and wide-ranging assortment of extensive holdings they own.
Most HNW individuals have the financial wherewithal to self-insure by taking high deductibles. Some factors that affect the premium for high net worth insurance are similar to those used in pricing standard policies, such as the ages of the insureds, claims history, the age, condition, and structural elements for buildings. However, underwriters will also use many other factors unique to HNW families, such as liability risk exposure for unusual activities, asset classes, occupation, travel, leisure pursuits, and much more.
Best High Net Worth Insurance Programs
When working with HNW individuals and families, it’s essential to find the best high net worth insurance programs that cater to them and how they differ. There is no better place to start your research than the ProgramBusiness.com website. It is designed to help independent insurance agents find and gain access to the markets they need for hard-to-place, unusual risks in the Excess & Surplus Lines and program business space.
A quick search will return the listing for the Irwin Siegel Agency (ISA). It is a leading provider of insurance services and risk management solutions within the Social and Human Service Field, insuring service providers in all fifty states. Founded by Irwin Siegel in 1960 and located in Rock Hill, NY, ISA set the standard for package insurance policies nationwide.
Siegel Private Client Group provides access to markets that allow you to offer your clients comprehensive coverage at a competitive price. Experience world-class, personalized service and tailored insurance programs designed to cover the specific needs of wealthy individuals.