protection

Any advisor who has dealt with high net worth individuals will know that their insurance requirements differ quite significantly from the average customer.

 

Christelle Fourie, Managing Director of MUA Insurance, the executive motor and home insurance specialist, has identified five of the most common pitfalls for brokers to look out for when it comes to insuring the possessions of high net worth individuals.

 

Under and over insurance of property

 

We have seen large fluctuations in the market values of homes in the affluent areas of South Africa over recent years. Market value is often confused with insurance replacement value and this is the reason why it is so important for high-net worth homeowners to obtain a professional insurance replacement valuation for their home and its contents. At MUA we have seen massive underinsurance on property, but also overinsurance. For example, the market value of a property situated in a suburb like Bakoven or Sandhurst may be set at R25 million, but the actual replacement value of the building is only in the region of R10 million. These clients are paying premiums on a value which will not be paid out to them in the event of a claim.

 

Fragmentation of cover

 

As a result of the nature of the high net worth individual, purchases of fine art, new cars or holiday homes are made over a period of time, with the result that insurance can often be fragmented with multiple policies with different brokers and insurers. By consolidating their insurance cover, you will probably be able to reduce costs for your clients as well as avoid any gaps in their coverage, which may only be discovered once a claim has been filed.

 

Work with the right people

 

An insurer that deals exclusively with the general public is unlikely to be properly equipped to deal with the complex set of needs of your client. In contrast, insurers who specialize in providing cover to high-net worth individuals often tailor their policies to meet the very specific needs of their customer base.

 

It is also important to consider the specialist claims handling ability of the chosen insurer – not all insurers are geared towards having a Bentley fixed following an accident or a silk Persian rug repaired after water damage.

 

Insure valuables correctly

 

Whether your client is an avid collector of fine art, wines or antique jewellery it is important that all their valuables are correctly evaluated. Certain policies aimed at high-net worth individuals do not require homeowners to specify each and every item in their home. However, a valuable collection of art or piece of jewellery needs to be properly assessed and valued and should not just be included under a basic home insurance policy.

 

Read the fine print

 

As brokers know, the devil is always in the detail. However, when it comes to insuring high-net worth individuals, the fine print becomes even more important. It is therefore crucial to understand what exclusions apply under these policies and how these could impact on their client. In most cases, an individual would be happier to pay more for additional coverage than discover too late that their policy does not meet their needs.