Non-Weather Related Risks and How to Protect Against Financial Loss

While severe weather is lurking around the corner, there is another threat brokers and agents should be discussing with clients: non-weather related water damage. Concealed pipes, leaky plumbing, and appliance water lines are some of the biggest and least thought about risks to households. Yet, one major leak in a client’s home could result in a tremendous loss. For high-value homeowners, the financial loss increases exponentially.

It is estimated that more than 50 percent of affluent individuals are underinsured. As the economy continues to improve and the rate of wealth creation grows across generations,1 there is an increased demand for coverage within specialty markets.

Strong economic times create new opportunity for growth

One primary outcome to the rising affluent population is the booming housing market. Clients may mistakenly believe their homeowners policy adequately covers the home and what is inside it, but contents coverage is a percentage of the homeowners policy and has per-item limits on possessions such as antiques, jewelry and art.

“As wealth continues to expand on a national level and as consumer purchasing surges, people are investing in bigger, more expensive items,” said Bill Gatewood, Corporate Vice President and Director, Personal Insurance, Burns & Wilcox. “In a high-value home, the value of contents often exceeds the limits.”

Most people may not even be aware they have outgrown the standard market and need access to specialized markets. When wealth is amassed over time, the move from a standard market to a specialty market is often overlooked.

“If a broker or agent asks their client what they think is the largest risk for their property, they are not likely to say it is their washing machine, ice maker or second floor HVAC unit – but to their surprise, it may be.” – Heather Posner, Burns & Wilcox

“As their lifestyles change, their situations become more complex and require personalized insurance solutions to ensure sufficient coverage,” said Gatewood.

Private Client coverage can help ensure clients have the right level of protection for their dwellings and expensive possessions and collections. Additionally, under this coverage families can be relocated to a place of comfort that mirrors their way of life. Successful individuals want to ensure their lifestyle remains intact if something catastrophic happens.

Assessing the risks with the right questions

From high-end flooring, fixtures, and features within the home to collections of wine, art, and vehicles, there is no shortage of items needing to be protected against water damage.

“If a broker or agent asks their client what they think is the largest risk for their property, they are not likely to say it is their washing machine, ice maker or second floor HVAC unit – but to their surprise, it may be,” said Heather Posner, Director of Private Client Insurance, Burns & Wilcox. “Brokers need to remind clients of this significant risk and educate them on the resources and products available that can pay off in the long-run.”

Each client conversation should be treated as a consultation. Affluent individuals, in general, have many unique exposures that come along with the lifestyle. Policies can often be intricate and take time to navigate. By working closely with a specialty insurance expert, brokers and agents can gain more knowledge and continue elevating their service and insight.

“Much like the level of expertise expected from a financial planner who is managing a person’s entire portfolio, managing someone’s coverage should preserve their investments for the future,” said Gatewood. “Those in the Private Client category are likely the clients you meet with most regularly. During these touch-points, take the time to go over the changes in their lives, the properties and items purchased as well as the protective measures available to them and remind them of the areas where they may be at risk.”

A successful individual is likely making many investments for their future. Discussing their lifestyle and passions, while also asking open-ended questions can help flag items they may not think to bring up. As a new generation becomes wealthy, they may not view their personal items as needing to be insured. But as a broker, this is the perfect window of opportunity to have the conversation about protecting their property and possessions. Conducting an annual review of their home and educating them on the need to communicate expensive purchases is an important step in managing your long-term relationship.

Loss Control

With a specialized policy also comes the tools to provide early-detection. Knowing the added benefits to a plan and the assessments that can be done by working with partner companies, is another critical step brokers can take for their clients.

“Much like the level of expertise expected from a financial planner who is managing a person’s entire portfolio, managing someone’s coverage should preserve their investments for the future.” – Bill Gatewood, Burns & Wilcox

For example, did their client purchase a new piece of art or collectible memorabilia? Do they know where the water lines run throughout their house? Well-trained analysts, engineers and industry experts can come into a household to provide a fully-personalized consultation. From assessing where art work is displayed to using infrared lighting to identify threats behind walls.

The up-front loss control work for clients is a critical offering and this level of service demonstrates the value of receiving proper coverage to match their needs.

Getting smarter when the stakes are high

“Smart homes may seem like something you only see in Sci-Fi movies, but these high-tech devices are becoming more common than many may realize,” said Posner. As appliances get more intelligent, there are many with smart shut-off and early-detection devices built in.

Some insurance plans require water shut-off devices, much like it is required to have fire and carbon monoxide detectors and security systems. There are devices on the market that can be installed on water pipesto detect leaks the second it starts and others that serve as a first-alert system. There are many extra services that come with the level of coverage needed and it includes value-added offerings like discounts on these technologies. Being aware of and utilizing these devices can be a win-win for the broker and the client.

While finding the right solutions can be more complex for this segment, being educated about the services available and willing to ask the right questions can make a lasting impact. Being a trusted adviser to high-value homeowners is a key role for brokers and agents. From setting up a new policy for someone coming from the standard market or re-visiting a policy on a regular basis, the expertise provided helps strengthen relationships and elevates the overall experience, ensuring adequate protection.

Sources:

  1. http://www.businessinsider.com/rich-millennials-money-tips-according-to-wealth-adviser-2018-5
  2. https://www.consumerreports.org/home-maintenance-repairs/smart-home-devices-that-stop-leaks-and-water-damage/

Learn more about Private Client coverage.