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Ransomware: Three Critical Mitigation Strategies Family Offices and High Net Worth Individuals Should Evaluate

Most of us are acutely aware of the existence of Ransomware and the devastation it can cause. Since early 2016 there have been about 4,000 attacks daily, which is a 300% increase over the 1,000 daily attacks reported in 2015? The challenge we face is how to ensure we do not become victims of this debilitating threat.  

Engagement Ring Insurance: One key coverage difference you should know about

By Kurt Thoennessen, CAPI


There are many helpful articles that discuss the benefits of obtaining special insurance for your engagement ring. They discuss concepts such as agreed value coverage, not relying on your homeowners or renters insurance, and worldwide coverage. These are all important concepts to understand, but the actual policy language is important as well.  

This article will reveal a few key differences in policy language between two major insurance company's engagement ring policies. This will help you better understand how these insurance policies differ so you can make an informed decision about which one to purchase.  

Battery explosion leads to $1M damages







We've heard of exploding headphones, hoverboards, and infamous phones. A power pack used for jump starting a car engine has made it to the list.

 

The explosion caused severe property damage, estimated at around one million dollars. The powerpack was in the trunk of a car, while parked in the attached garage of a home. "This is one of the hottest fires I've ever seen. With luck, we will have this homeowner back in their home by Christmas. I, for one, will never carry a battery pack in my car." says Mark Gunthner of Paul Davis Restoration, the restoration company rebuilding the house. Fortunately, no one was hurt.

 

While the probability of such a scenario remains small, it is well worth bringing up with your clients. By nature, batteries are prone to explosion. There is a thin membrane within the cell of the battery that serves to keep electrodes from touching.  When that slips, things get hot quickly.  The battery typically contains a flammable electrolyte.   It does not take a rocket scientist to figure out how quickly this leads to kaboom.  Here are two articles useful in understanding the reasons behind lithium ion battery explosions.

 

 

Obtaining insurance rates for luxury assets just got easier!


By Kurt Thoennessen, CAPI
There are many solutions to insure luxury assets in the insurance market today. This fact makes deciding which one to select overwhelming.

Private Risk Management Association Founding Member Joins InsurTech Revolution with New Digital Client Experience Platform


Ericson Insurance Advisors has launched a new web site that will enable personal insurance buyers to evaluate their coverage and obtain rate information for luxury assets. The site,
 InsureScope.com, adds a new digital offering to Ericson's longstanding model as a leading, boutique provider of personal insurance advisory and brokerage services.
 

VaporStream will make our communications more secure!

Can I lower the Other Structures coverage limit on my million dollar homeowners policy?

7 Major Pitfalls of High Net Worth Personal Insurance Programs

Can I lower the contents coverage on my million dollar home insurance policy?

It is very common for the contents coverage limit to be higher than what is needed by owners of million dollar homes, and most insurance companies do not allow this limit to be lowered.

What should my deductible be for my million dollar home?

By Kurt Thoennessen, CAPI

The answer to this question depends on your tolerance for risk and how much financial incentive you will receive for taking a higher deductible. The intent of this post is to raise awareness for higher deductible options on your home insurance and to discuss some of the reasons a higher deductible makes sense, specifically for owners of million and multi-million dollar homes.

Claims Happen

Before we talk about deductibles, I would like to discuss the importance of having an insurance policy in place that is structured properly and will respond to losses when needed. Sometimes we lose sight of the real possibility of experiencing a loss and overlook the need to be prepared for them. As a point of reference, I am including several data points from The Insurance Information Institute that provide insight into the frequency of home insurance claims.

Homeowners Insurance Claims Frequency*

  • Homeowners claims related to wind or hail are the most frequent; the costliest are related to fire and lightning.
  • About one in 15 insured homes has a claim each year.
  • About one in 30 insured homes has a property damage claim related to wind or hail each year.
  • About one in 55 insured homes has a property damage claim caused by water damage or freezing each year.
  • About one in 215 insured homes has a property damage claim due to theft each year
  • About one in 265 insured homes has a property damage claim related to fire and lightning.
  • About one in 1,000 homeowners policies has a liability claim related to the cost of lawsuits for bodily injury or property damage that the policyholder or family members cause to others.

*Insurance Information Institute calculations, based on ISO®, a Verisk Analytics® business, data for homeowners insurance claims from 2010-2014

http://www.iii.org/fact-statistic/homeowners-and-renters-insurance

Risk Tolerance/Comfort Level

As you begin to ponder your homeowners deductible, it is helpful to understand the types of losses that you may end up paying for out of pocket. The following examples are of claims under $10,000 that my firm has seen on million dollar homes.

  • A basic lightning strike that damages a home's electronics, a pool pump, or other part of the home has incurred a cost of $10,000 or less
  • A small water damage claim, either from a burst pipe, appliance leak, or plumbing backup may fall under $10,000

It is important to remember that million dollar homes may have a lower frequency of loss than smaller homes because of the application of risk mitigation technologies, like centrally monitored alarms, automatic water shutoff valves, and backup generators, that help prevent losses from occurring.  In addition, it is of equal importance that losses to million dollar homes can be more costly to repair, which will help influence claims to exceed deductibles.  It is interesting to note that some home policies will waive the deductible for certain types of losses if a claim exceeds $50,000. This coverage feature is a rare benefit that further demonstrates the value of high deductibles for million dollar homes.

Financial Incentive

Besides determining your comfort level with higher deductibles, the premium credit you receive is also a crucial factor to consider.  Premium reductions vary depending on the home, but the statements below provide a good representation of the premium savings achieved with higher deductibles.  These statements were drawn from a survey of over 600 independent agents and brokers from across the United States about their new high net worth clients who were previously insured with mass-market insurance companies.

  • Increasing the deductible on a $1 million home from $500 to $2,500 could save $900 per year.
  • Increasing the deductible on a $3 million home from $5,000 to $10,000 could save $1,800 per year.

*ACE Private Risk Services White Paper - How High Net Worth Families Overpay to be Underinsured http://www.acegroup.com/us-en/assets/ace_overpaying-to-be-underinsured-white-paper_mar-2013_hub.pdf

Deductible Observations

I have worked with owners of million dollar homes for over 10 years, and that experience has provided me with the knowledge about which deductibles were optimal for them. The bullet points below provides a general guide, based on my experience, for the suggested deductibles at the different home replacement cost levels.  

  • For a reconstruction cost between $1,000,000 to $1,500,000, the suggested deductible is $2,500
  • For a reconstruction cost between $1,500,000 to $2,500,000 the suggested deductible is $5,000
  • For a reconstruction cost between $2,500,000 to $3,500,000 the suggested deductible is $10,000
  • For a reconstruction cost between $3,500,000 to $5,000,000 the suggested deductible is $10,000 or $25,000
  • For a reconstruction cost between $5,000,000 to $10,000,000 the suggested deductible is $10,000, 25,000, or $50,000

Having a higher deductible on your home insurance will help reduce your insurance expenditure, and move more of the financial burden from a loss at your home back to you. As you continue to work to find the most advantageous deductible for your million dollar home, please feel free to contact me at kthoennessen@ericsoninsurance.com.

Also, check out www.insurescope.com to sign up to receive updates about new insurance platform for owners of high value homes and other valuable assets being  launched in early 2017.

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